22 May 2019
The Mediterranean climate of the French Riviera, its atmospheric towns and stunning coasts have been a magnet for wealthy travellers, artists and celebrities for more than two centuries. Today, this corner of south-east France, known to the French as the Côte d’Azur, continues to attract international visitors in enormous numbers – some 6.5 million a year according to local estimates1.
While most of those visitors are tourists on vacation or people drawn to celebrated cultural or sporting events, such as the Cannes Film Festival or the Monaco Grand Prix, the region is also hugely popular with international property investors. Indeed, a high proportion of prime and ultra-prime property buyers in the region are from overseas, and the Riviera is home to more than 300,000 foreign residents2.
Like other high-end hotspots around the world, fluctuations in Côte d’Azur prime and ultra-prime prices are often fuelled by global economic and political forces. Most notably in recent times, the presidency of Emmanuel Macron has boosted property markets. His more welcoming attitude to foreign investment and positive economic reforms has encouraged international buyers3.
This is a diverse market offering plenty of choice. The Cote d’Azur stretches from Saint-Tropez in the west to the Italian-French border. At the high end, Monaco’s property prices are among the most expensive in the world. However, other areas are increasingly popular, including towns such as Cannes, Nice and Cap d’Antibes. Other fashionable locations include the Saint-Jean-Cap-Ferrat peninsula between Nice and Monaco, an area of outstanding natural beauty, and areas such as Beaulieu sur Mer, Mougins, Èze, Cap d’Ail and Roquebrune-Cap-Martin. Many of these seaside resorts have bustling marinas with berths for superyachts.
The French Riviera is one of the most economically vibrant areas of France, second only to Paris. Property prices in the region have already responded to France’s improving economy and the upswing in international interest – and now look likely to make further progress.
Investors accessing the rental market and buyers looking for second homes provide a constant source of demand in the French Riviera. Accordingly, the area has more in common with Paris and other prime residential markets than its neighbouring regions in France.
“Alongside Paris, the Cote d’Azur is a popular region for prime and super-prime property buyers,” says Syed Raza, Managing Director, Global Banking and Credit Solutions Group at Barclays Private Bank. “The trends we see in the Cote d’Azur to a certain extent mirror those we see in Paris, where the sentiment, appetite for risk and wealth of international buyers are more crucial drivers of demand and prices than more local factors – certainly at the upper end of the markets.”
That’s reflected in the recent performance of the Riviera’s property market, with prices making similar progress to Parisian property. Prices were up by more than 4% last year in parts of the region, according to data from the Notaires de France4, though performance can be highly localised. Estate agent Savills says prices of prime property grew 6% in Monaco in 2017, for example, but were flat in locations such as Saint-Tropez and Cap d’Antibes5.
The varying levels of growth across the region partly reflect the fact that it is still in recovery from the years following the financial crisis. Knight Frank figures suggest transaction volumes for apartments, for example, fell 36% in 2008 following the crisis, but have been recovering since 2014. Resale transactions rose 5% between 2016 and 2017 according to the local Chamber of Commerce, and are now back close to pre-crisis levels6.
Overseas buyers and investors will remain an important driver of trends in the Riviera’s property market, says Katya Zenkovich, a Partner within Knight Frank's Global Prime division.
“International buyers are the driving force of sales in the region, with the British accounting for up to one in four prime residential purchases. Russians living in France as always prefer the Côte d'Azur,” she says. “In Cannes, Nice and Antibes, the local market offers great rental potential at any season and, historically, values are lower there than in a more bourgeois Saint-Jean-Cap-Ferrat.”
Importantly, the economy of the Riviera has the potential to drive the strength of the property market in future. Tourism accounts for around a fifth of the region’s GDP. With 13 million passengers a year, Nice is France’s second busiest airport7. It has recently undergone significant expansion, including a new runway for private jets.
Jad Bardawil, Head of EMEA Banking and Credit Distribution for Barclays Private Bank, says: “Nice Côte d’Azur Airport is becoming an appealing alternative to major hubs, attracting investment in the local economy.”
The high quality of life attracts other international industries, too. The world-renowned Sophia Antipolis technology park close to Antibes employs more than 30,000 people, while the €2.5bn Éco-Vallée project close to Nice will include a new business district, R&D facilities, a retail park and residential property.
This is not to suggest buying in the French Riviera is risk-free. It has similar challenges to those that apply in Paris. “While domestic political unrest or international macro events have the potential to impact the market, the area’s natural attributes are likely to continue to attract buyers, and its broadening business landscape provides further support,” says Raza.
The French economy grew by 1.6% in 2018, and it is forecast to grow at the same level in 2019, according to the IMF8. That’s more or less in line with the growth seen over the past decade. However, the effects of President Macron’s economic reforms could feed through over the medium term and, crucially, he may have changed the mood in France. “Perceptions have changed, both at home and in the international community, making France more appealing to international investors,” Raza says.
Perceptions have changed, both at home and in the international community, making France more appealing to international investors
Managing Director, Global Banking and Credit Solutions Group at Barclays Private Bank
Not that the President is without his critics. The campaign by the gilets jaunes in recent months has captured global attention, with large numbers of protesters taking to the streets to complain about poverty-level wages, taxes on fuel and low standards of living.
Much of the anger focuses on President Macron’s efforts to fulfil the campaign pledges he made to modernise the French economy; these have included labour market reforms, tax cuts for high earners and the wealthy, and an increased focus on businesses’ needs. The French government has promised to reduce the corporate tax rate from 33.3% to 25% by 2022.
While there is a risk the French government will now scale back the ambition of its reform programme, the changes already made by President Macron are significant. These include a scaling back of France’s wealth tax and changes to property market taxation, which should boost the lower end of the market. If the government can hold firm – and French opinion polls do now suggest most of the population wants the protests to stop – there is a real opportunity to improve French competitiveness and productivity.
If so, the comfort levels of foreign investors in France’s property market will continue to increase, boosting demand, particularly at the prime and ultra-prime end of the market, already witnessing an uplift. It helps that buyers in France continue to benefit from ultra-low interest rates and a currency that remains cheap by historical comparisons. A US buyer in France in February 2019 would find their dollars stretching almost 18% further than five years previously in euro terms.
Most prime and ultra-prime property on the Côte d’Azur is made up of houses rather than apartments. Typically, properties in this segment of the market would offer a minimum of four en-suite bedrooms, a garden, garaging, a swimming pool and, in many cases, sea views. Larger properties have often been converted to feature facilities such as home cinemas, as well as staff quarters.
In the towns and cities, including Nice, Cannes, Saint-Tropez and Monaco, centrally located apartments, with at least two bedrooms, access to terraces or gardens, and importantly, sea views, tend to generate most demand. There has also been increasing demand for property in private gated communities in recent times.
In rural areas, properties range from traditional chateaux, farmhouses, country houses (bastides) and village properties to more contemporary villas. The Riviera’s ‘Belle Epoque’ villas, built in the late 19th and early 20th centuries, have particular charm and charisma, though may need updating and modernising.
The outlook for prime residential property on the Côte d’Azur is positive. Both 2017 and 2018 saw strong performance from many parts of the Riviera, and this has the potential to continue during 2019. Across France as a whole, house prices rose at an annual rate of 2.9% during the third quarter of the year, according to the most recent figures from Notaires de France, with Riviera hotspots such as Toulon doing even better.
President Macron has eased the concerns of international buyers and investors in the country, although his reforms will take time to bear fruit. In the meantime, the protests of recent months have given the government pause for thought.
Moreover, France is not immune to external risks. Key risks to the global economy include an escalation of trade tensions between China and the US, a greater slowdown in China’s economic growth than forecast, or a no-deal withdrawal of the UK from the EU. All of which could impact the prime and ultra-prime property market.
At a global level, the trade tensions between the US and China threaten to act as a brake on economic growth, potentially leaving prime and ultra-prime property markets vulnerable to a slowdown.
Nevertheless, there are good reasons to remain optimistic. The quality of life that the French Riviera offers – the mix of its vibrant urban settings, beautiful scenery and a wonderful climate – will continue to attract buyers, irrespective of the political and economic backdrop. France’s economy has stabilised and the rule of law remains as established as ever, which is attractive to investors from less stable regimes. Low interest rates make borrowing affordable, while the strength of the dollar has boosted the purchasing power of many overseas investors.
Moreover, Riviera property looks less fully priced, on a historic and relative basis, than many other European hotspots. Prices in the region have risen more slowly than in Paris, for example, where the market was up 12% in 2017, the last full year for which data is available, against only 5% in Saint-Tropez For investors and second-home seekers alike, there is still value to be found on the Côte d’Azur.
Barclays Private Bank has local Credit Specialists in Monaco with expert knowledge of the market, to help make your real estate purchase a reality. Contact your Private Banker to find out more or visit our Banking and credit solutions page.
