Skiing into the Swiss property market
4 Dec 2024
05 July 2024
Please note: The external views expressed in this article are not the views of Barclays Private Bank, and forecasts are not a reliable indicator of future performance. Professional advice should always be sought when selling or buying property.
The Grand Hotel hairpin of the Circuit de Monaco is perhaps the most famous in Formula One. After braking hard down the hill of the Avenue des Spélugues, drivers slow to a relative crawl of 30 mph as they navigate the slowest corner of any grand prix race. Two turns later, along Boulevard Louis II, they accelerate to 160 mph and fly through the Larvotto tunnel.
The new residents of Monaco’s Le Renzo apartment complex have a bird’s eye view of this fascinating section of the race. The luxury apartment block sits on the western edge of Mareterra, a new six-hectare district in Monaco built on land reclaimed from the Mediterranean Sea.
As well as luxury apartments, Mareterra, which is scheduled for completion next year, boasts waterfront villas, town houses, a compact port and a shopping district, sheltered throughout by mature trees and shrouded in native flora. It is one of the reasons that the prime and super-prime property market in Monaco and the French Riviera is experiencing unusually high demand for turnkey property, be it new-build or renovated.
“The hottest properties right now are turnkey properties where the seller has not spared any expense,” says Alex Balkin, executive director of Savills French Riviera. “These are properties that boast the full monty in terms of amenities, design, taste, equipment and quality of materials — the ones that look like they’re from a glossy magazine. They provide instant gratification for younger buyers seeking immediate entry to the scene.”
Balkin says that younger buyers don’t see a secondary home as a place that should be locked up for most of the year. “They want to go there almost every week for long weekends, working as and when they please,” he says. “And they want close proximity to hot spots such as Saint-Tropez, Monaco and Cannes.”
The French Riviera needs little introduction. It boasts a lifestyle where one might breakfast on the beach in Monaco, spend the morning paddle boarding off the Cap d’Antibes, ski the afternoon in Gréolières-les-Neiges, shop the evening at the boutiques along the Boulevard de la Croisette in Cannes, then party the night away in Saint-Tropez. Indeed, Savills’ index of the 60 leading locations for secondary homes places the French Riviera in the top spot, ahead of the likes of Aspen, Tuscany and Mallorca1.
Stephen Moroukian, Head of Product and Proposition for real estate financing at Barclays Private Bank and Wealth Management, suggests that a generational shift has put paid to the old mantra “my home is my castle”. “The younger generation doesn’t want to live in old buildings with limited amenities,” he says. “They want all-in living with serviced gyms and pools. They want somebody else to look after maintenance. At the top end of the market, these sorts of properties are attracting a premium.”
He says that buyers today care more about practical things like fast, stable internet connections for remote working, quality of education and healthcare, beach access, off-street parking and short commutes to European hubs. “Being close to an airport is now seen as a positive rather than a negative,” he explains, adding: “For high-net-worth and ultra-high-net-worth buyers, tax policy changes and next-generation planning are also factors.”
Jack Harris, a Partner in the international residential department of Knight Frank with responsibility for the south of France, says: “There’s an unusual amount of new turnkey stock across the French Riviera because of the logjam that Covid created. In other words, developments from 2020-2021 are coming to fruition now. And demand is meeting that supply, which is the important thing.” He adds that the hottest locations are on the Saint-Tropez and Cap d’Antibes peninsulas.
The region is also starting to see the return of the rental investor, Harris says. “Over the last few years, the rental market ebbed and flowed, but now it’s returning to normality. It’s a little bit like seeing film stars returning to the Cannes Film Festival. We’re seeing two angles: interest broadly for rentals in the top holiday home locations, and buyers looking into luxury rentals with a view to building investment portfolios.”
The trends in the market today are set against a backdrop of a sharp rise in global interest rates and mortgage prices (albeit both are expected to start falling in major economies later this year). A recently-published Savills report found that prime and super-prime property transaction volumes across the French Riviera dipped after interest rates spiked — but prices remained stable. This was attributed to sellers entering a “wait-and-see” position that appears to be easing.
The average mortgage rate in France has fallen consistently since the start of the year, from 4.21% in December to 3.8% in mid-April, according to the Observatoire Crédit Logement, a market watchdog. Meanwhile, stabilising inflation and consistently low unemployment have given leading central banks bandwidth to cut interest rates, raising hopes among buyers that mortgage rates will ease further. In early June, the European Central Bank trimmed its base rate for the first time since 2019, by a quarter of a percentage point. The market consensus is that the Bank of England will cut next, followed by the US Federal Reserve later in the year.
Harris of Knight Frank says: “If you consider the headwinds that the region’s luxury property market has faced, with high interest rates, political uncertainty in the form of multiple upcoming elections and the slow return-to-normal after the pandemic, you’d expect it to be on its knees. The reality is that for prime and super-prime, there’s real strength.
“International buyers suffered a shortage of stock over the last few years but now we’re seeing much more coming to market. Owners who stayed put during the pandemic are thinking ‘life is returning to normal’. And more and more high-quality properties are coming to market, which is helping momentum.”
Barclays’ Moroukian says the market for best-in-class properties — those in the top 5% that “tick all the boxes” — are the most likely to have maintained their value. “Everybody wants them but of course, they’re always in the shortest supply,” he explains, adding: “When you’re on the long road to finding the perfect property, you need a top team to help you navigate the tax implications — particularly when the political landscape is changing.”
Americans, who have long had a love affair with the French Riviera, are flocking back to the region — particularly those who work in financial services, Savills’ Balkin says. They are being accompanied by buyers from the Middle East, Northern Europe, and French expats returning home after working in Dubai, Hong Kong, and other leading business centres, he adds.
For Balkin, the outlook for the property market in the French Riviera is “sound”, underpinned by conservative loan-to-value ratios, especially at the high end. “It’s super-chic, it has old-world class, it has political stability,” he says of the region. “And of course, it’s perceived to be a safe store of wealth.”
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Source: Savills, ‘Prime Residential Index – World Second Home Locations’, 28 July 2023Return to reference