The Rent in Paris

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The Rent in Paris
The most recent data available this summer confirms what is now almost a year-long tendency: rent is stable and in some cases prices are flinching. In general, the market is divided into two main categories: furnished (meublé) and unfurnished apartments. The former have become more and more popular in recent years among owners. First, they present significant fiscal advantages. Another reason is that leases for furnished apartments are more flexible since this kind of property is essentially destined to shorter-term occupancies. Unlike normal leases (for long-term rental of unfurnished apartments), they can be renewed under certain circumstances every year and not every three years.   These advantages decided many owners to rent their property furnished and increased the inventory of such apartments in a relatively short time. With demand shrinking since at least the summer of 2004, rent prices are slowly going down. One of the reasons for the decline in demand is that foreign renters, a major actor in this market,  have fewer euros to spend because of the weak dollar and have became,  in view of the increased inventory of available apartments, more picky. As for the general market of long-term unfurnished apartments, the picture is more complicated. A queue of thirty candidates carrying their “dossiers” (the papers you need in order to get a lease, such as your paychecks as well as those of your guarantors), lining up half an hour before visiting time, is a scene belonging to the past, real estate agents say. People who were ready to decide instantly, fearing to miss a rare opportunity, now take their time and realtors need to invest more time and effort to find tenants. This is clearly seen when we look at the figures for the last three years: prices went up 4,9% in 2002, 3,8% in 2003 and 4,1 % in 2004.  However, according to Century 21 statistics, in the last 12 months prices of new leases in Paris went down 1,56%. However, prices in Ile de France went up 2,64%, which probably means that demand is “spilling out” of Paris because tenants can  no longer afford the capital’s prices. The big rush in the rental market that lasted more than five years has clearly ended. As always, reasonably priced good property rents out easily but potential tenants do not hesitate to state their terms regarding improvements and maintenance. Prices of unfurnished apartments are at their 2004 level and vary between €20 and €25 per square meter for a single bedroom (2 pièces) apartment. Less attractive apartments with slight problems (not enough light, rez de chaussée/ground floor) can be negotiated for much less than what they would have brought two or three years ago. A friend of mine, a waitress without a French passport, said she was surprised that realtors are willing to show her such apartments even when they know she is not a “dream” tenant. A couple of years ago she said it was not possible. Rental prices for larger apartments are losing even more ground than the prices for studios and one-bedrooms. According to Century 21 data, they have dropped as much 4,40% on average.  The average price of furnished apartments is much more difficult to calculate because the level of comfort they offer varies from simple to luxurious. This devolution in rental prices, if it continues, will bear, eventually, on property prices. Net return on rented apartments in Paris is around 4-5% in areas where purchase prices are relatively low (18, 19, 20 arrondissements) and 3-3.5% in more expensive areas. These figures are already very close to the mortgage interest rate and if rent remains stable or even drops, those who already think twice about investing in the property market might think three times or look for alternatives. Stable rent will also discourage tenants from becoming owners, especially when high property prices make Parisian apartments out of reach for many households. The bottom line is that the Parisian real estate market shows more and more signs (see our last column) that the bulls are getting tired after seven years of going up hill and might need a good rest. Disaster scenarios are unlikely, but oil at 66 dollars a barrel was too, and not so long ago. 
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