Postcard from the Riviera. No 3

Posted by admin in Property Investment, Property Letters | January 6th 2008

What about the “downturn” on the Cote d’Azur?

It is true that there is a great deal of talk about the end of a ten year worldwide property boom following the credit crunch in America. Credit may be more difficult to access for a while. Prices may soften, and people who have bought for a quick turnover may be disappointed in the short term, in some markets. But with the well clichéd three ground rules of property being « Location, Location and Location » I’m not too concerned about the market in this corner of the Euro-zone.

On some stretches of the Mediterranean coastline development has been uncontrolled and haphazard, leading to an ugly oversupply of poor quality holiday accommodation – and vast tracts of it are horrible. On the Cote de Azur by contrast there is almost no new land being released for development, so there is an undersupply, and the controls and restrictions are tight and planning permission, even for extensions, is difficult to get.

What’s good about that? The market remains firm.

People who come here are looking for something beyond the ordinary. Best of all, you can walk out of your front door in a pretty suburb of Cannes and KNOW THAT YOU ARE IN FRANCE. There is charm and local colour oozing from every pore. You can drive for 15 minutes in any one of many directions and find yourself in a rural heartland of France so charming and rich in the things that spell “quality of life” that discerning people flock here, and yes, they want to protect it too.

It’s intriguing that a set of self-regulatory conditions and many contradictions have evolved over the centuries in this part of France. For example: Nothing is cheap (except sunshine), and you wouldn’t want it any other way. The bureaucracy is a hurdle, but in the end everyone is protected. Regulations are many and carefully applied, but nowhere will you ever feel so free.

The BIG PICTURE – a perspective on international property (including French property):

In their 2006 annual report one property giant reported that demand for international property is increasing by 20% per annum, and the continuation of the longstanding love affair between international buyers and France meant that their French activity was up 50% in the year. Further, that established Cote d’Azur markets, including St Tropez, Cannes, Valbonne and Monaco have seen very high demand as quality property is in short supply.

They predict that the transition of the worldwide residential property market from a pursuit of the minority privileged to a mass movement, as witnessed in the last 10 years is only the beginning. Changes in the world’s developing economies mean that the second-home market growth of the last 10 years will be dwarfed over the next 10 years.

Annualised percentage capital price growth showed South African property increasing by 14% overall. France saw an increase of 9.5%, and the UK 5%.

In the big city centres, London cost 27 520€/m², Monaco cost 24 296€/m², and Paris cost 15 296€/m².

The important message coming through is that interest in prime property remains firm with demand for second homes being the principal driver, while owner occupiers are increasingly attracted by the security and comfort of managed properties.

Sharpen Focus.

When it comes to rental properties…it has to be Cannes:

There is litle chance of covering your costs and your mortgage from summer and occasional out-of-season rentals. We have to be able to offer accommodation to festival and conference delegates (unless we go for the long term rental market, which is possible). Hosting delegates and business people is major business in Cannes, and accommodation is difficult, especially for those who don’t feel comfortable speaking French. Also surprisingly the service and backup offered is generally shoddy, so thanks to a little normal Southern African attention to detail, guests today are delighted.

Most South African investors in Cannes (and there are many) prefer complete ownership of their own property or properties, although some are sharing with family of friends to make their money go further. Individual owners or small partnerships can enjoy holidays in their “investment” from time to time, while renting when they are not in residence. They can sell their property and enjoy their capital gain when they are ready to, or roll-over into a bigger investment and do it all again, as some are doing after only 3 to 5 years. The freedom to choose remains theirs.

Looking for an argument?

Perhaps you have enjoyed the controversial statements that Sky News has been putting out in the last few months, accompanied in each case by the question “Looking for an argument?” There follows invitation to go to their website to express your own views on statements such as:
Politics is a waste of time.
Size zero is beautiful.
Alcohol is worse than cannabis.
Global warming is a lie.
Abortion is murder.
Football is corrupt.
….and others that are equally outrageous! Or are they?

Here are another couple:

“The French Riviera is the best place in the world to live.”
Many people would argue that the statement is indeed true – so many of the worlds most successful people have invested here, and continue to invest here, and choose to live or spend time here  irrespective of their backgrounds in business, the arts, sport, science or politics. That’s been true for centuries and that says to me that property investment here should be good too, in the long term.

And:
“Everyone should come to Cannes in January.”
The Victorians knew it, and this coast was developed as a popular destination specifically to escape from the rigors of North European winters. It wasn’t until the 1930’s that hotels even bothered to stay open for the summer. The Carlton was the first to give all-year trading a try and it was followed a year or two later by the Martinez and the Majestic, and then slowly the others followed. Now summer is the high season, but winter in the Riviera remains a very well kept secret. It is stunning here in January!

And the price of property is still affordable.

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