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PROPERTY LETTER 16th June 2009.

Dear All,

WHAT IS THE PROPERTY MARKET DOING ON THE COTE D’AZUR?

Everyone wants to know the answer to that question, and I can relate what I see in the marketplace, and what I’ve heard or read.

Internationally it is becoming accepted that we are through the worst. Britain has officially returned to growth (the recession therefore is officially over) although recovery will be slow and unemployment will continue to rise, and businesses will continue to close for another year or more. Europe is likewise returning to growth. Mortgage lending is on the increase in the UK and France, and house prices are edging upwards. The pain is far from over, but there is hope again.

This quote is from Edmund Conway writing in The Daily Telegraph on 10th June 2009:

“The recession is almost certainly over. The economy will return to growth imminently, if it isn't doing so already. The evidence surrounds us: surveys show that the services sector, worth three quarters of our national output, is growing again, and it emerged yesterday that the manufacturing sector is doing the same. Having slimmed down, and cut costs and inventories, companies are making money once more; banks are even starting to lend more freely to households and businesses.”
 
Locally:

• Cannes and the French Riviera are not “the rest of France”. They are an entirely different market, driven by different forces, and answering and subject to different dynamics.
• In France property prices contracted 5% in the first quarter of 2009. I can confirm that the volume of sales was extremely low in Cannes, and that prices here are likely to have contracted too, for the simple reason that the only sales were fire sales.
• When you look at the properties on offer today (and featured below) you will see that asking prices are generally similar to those in the third quarter of last year when international markets went into turmoil. I have highlighted some notable exceptions because there have been and there still are some very attractive offers to be found, and we have been lucky to be able to take advantage of some of them – however it would be wrong to think that the market is flooded with cut-price property. There may be some, but generally sellers are holding on for an improvement before putting their properties on the market and in this part of France people can afford to wait.
• In staying the same for a while, prices have become more attractive – and this might be interpreted as a de facto price contraction. Certainly that is how sellers see it.
• There is pent-up demand which is beginning to be felt as we are experiencing significantly increased enquiries and sales, and there is pent-up supply which is also beginning to be seen as more product comes onto the market.

So where does that leave us?
This is not a speculators market although there are opportunities sometimes and we look for those, and try to put clients together with them when we find them.

The property market here is generally mature. It has been an investment destination of choice for people looking for the good things in life since ancient Greek and Roman times, but in more recent times it has been extremely popular since the Victorian and Russian aristocracy flocked to the French Riviera before the turn of the 20th century.

Strong demand has fuelled price escalation in recent decades but it has been sensible price escalation, largely because credit has never been a large part of French culture, and French banks have not issued credit based on anything but an applicant’s ability to repay through his regular proven income. (They will not take into account future or projected income to the frustration of many, but doesn’t that seem to have been a sensible policy in the light of what happened?)

May I remind you of what I wrote in a Property Letter in February of this year?
   French household debt as a percentage of GDP     47.5%
    USA household debt as a percentage of GDP          98.2%
    UK household debt as a percentage of GDP           103.5%
(2007 figures)

All things considered the market is coming back to life, and we are busy again.

•

WITH SOUTH AFRICANS IN MIND (and apologies to everyone else)

We are seeing a significant rise in the number of enquiries from South Africans in spite of the recession. This must be partly because we have worked hard to spread the word about property on the Cote d’Azur amongst South Africans for seven years now, but only partly.

I think other factors are also at work:

• The Rand is very strong and if ever there was a time to consider externalising funds and investing them in safe managed property it must be now. Combine that with static if not slightly depressed property prices on the French Riviera and the combination is, one might say, a “no brainer”.
• Most South Africans we meet quiz us on investing in property offshore.
• Three topics that always come up are Zimbabwe, Zuma and Crime, and the thought that perhaps – just maybe - it would be possible or wise to establish a little nest-egg (if not a bolt-hole) abroad.
• Almost without fail people want to know that we will be on the ground in France in the long term, to help through the process of purchase and to be there for them when their transfer is through – to keep control of their administration, management and rentals. That is exactly what we do.

Greeff Properties.
On our most recent trip home to Cape Town in April Vicky and I were privileged to be introduced through friends to Mike Greeff. Mike and his team believe in personal service as we do, they talk to their clients and rank them as friends and colleagues, and value long term relationships with them.

Vicky and I were afforded the opportunity to meet and speak to the team at Greeff Properties at a Friday morning meeting, and to explain to them what we do in France, and discuss ways in which we can work together in the future.

We are excited about the prospect of raising awareness of the opportunities we can offer South Africans in property in France, through Mike and his team, and likewise to spreading the word through our network of the opportunities that Greeff Properties have to offer in the spectacular Southern Suburbs of Cape Town. Knowing how they work now, I also know that nobody is going to do a better job for our valued friends and colleagues when they have property business in the Cape than Mike and his team.

THE DEPTH AND THE BREADTH – FROM BED-SITS TO VILLAS.

Vicky and I started here over seven years ago as dispossessed Zimbabwean farmers needing to build a new life after losing everything back home. Our need at that time and that of farming friends and family was to find affordable (mostly small) rental units which could start to generate income, and above all build value.

The Property Letter was born, and the first one in April 2002 went to less than 20 people who had expressed interest in what we were trying to do – or who were so close to us as friends or family that they got the letter anyway. They had no choice!

Today the Property Letter goes to many hundreds of interested people and we don’t know you all personally any more unfortunately, but the basics have remained the same. We work to identify worthy properties and we distribute that information through the Property Letter network, entering into personal communication as soon as someone begins to show interest in something in particular. We are here to help with every step.

Of course we are now aided by our website, and I sometimes ask myself if the old Property Letter is archaic. Should I abandon it and move with the times? When ever I suggest it I’m told that I must carry on….so I will do so as long as it is relevant.

My problem: We now have a very wide spectrum of interest, from people just starting out to people who are looking for their “dream home” on the French Riviera. There are some for whom an investment in a rental studio is a very big leap and commitment, and others who have long since found their security, and are now looking for some well earned enjoyment of the fruits of their labour.

The first group is likely to perceive all the “fancy villas” and “expensive penthouses” as irrelevant at best and quite possibly annoying. The second is likely to flip through all the little studio apartments and lower budget offerings with impatience, because for them they are a waste of precious time.

There is a place and a genuine need for both, so we will continue to cover all the bases, but I will send out a separate Property Letter in the coming weeks covering “Just Villas”.

I hope that is part way to a solution, but the “luxury portfolio” (for want of a better description) might well evolve on its own, and become separate over time.

With kind regards,
Guy.