Posted by admin in Property Letters | August 5th 2008

Dear All,

Market update:

The next year is going to be tough while we ride out the downside of an economic cycle which follows six years of low interest rates and rising property and asset prices. Most predictions are for a return to stability in 2009 and a return to economic growth in 2010.

France is less exposed than the USA and Britain because it was never as involved in the crazy lending spree that the USA and Britain experienced, and of all regions the French Riviera, and especially Cannes is the least exposed because of its “luxury” status. Neither buyers nor sellers on the Riviera are too stretched, nor buying their first home, nor hoping for (or labouring to pay back) a 100% mortgage. As usual, it is the less well heeled and the most exposed that are worst hit by the downside of any economic cycle.

But how is OUR market actually doing?

Buyers are expecting (or wishing) prices to drop so some of them wait for better days, and the market has certainly slowed as a result. It is a time of indecision.

Sellers in this wealthy part of the world have seen it all before and can generally afford to wait too. The result is that in an area where property is in such demand that there is seldom much on offer, now there is even less!

For anyone in a position to, now is the time to “cherry pick”. Some sellers are in need of selling, and a few bargains are cropping up. In my last Property Letter I highlighted a few of them, and will do so again today. A few investors have done very well with their purchases in the last few months and more with the means and the foresight will do well in the coming months because as soon as confidence returns the Riviera will be amongst the first to lift again. Few would argue that.

It is an interesting fact that some people who recently invested have expressed their relief that they “bought when they did”, because had they not done so their funds would inevitably have been tied up in other assets, and “not doing very well”. We have also had would-be sellers withdraw their properties from sale for the reason that they would prefer to ride out the current downturn owning property, rather than selling it.

The press have a lot to answer for:

I have quoted from “The Economist” magazine in these letters before – and I will do so again today. (So I’m not having a go at the press in general, but I do get fed up with some alarmist headlines!)

We are “herd animals” and it is amazing how we talk ourselves into crises, making them a lot worse than they should be:

From The Economist – July 26th – August 1st 2008.
“….Some blame the media for overhyping gloomy news. Phil Gramm a former senator from Texas and adviser to Mr McCain’s campaign, told the Washington Times that: “we have…become a nation of whiners. You just hear this constant whining, complaining about a loss of competitiveness, America in decline…Thank God the economy is not as bad as you read in the papers every day.”

He had a point. American headlines are crammed with words like “failure”, “hurting” and “Fannie Mae”. Foreign pundits sound even more bearish…. “The Great Depression,” thundered the front page of The Independent, a British newspaper, in April. The story underneath was about an increase in food stamps, after an effort to publicise their availability.

Amity Shales, the author of a history of the Great Depression, thinks the comparison absurd. During the 1930’s, she notes, “people lost their homes even though they had borrowed only 10% of the purchase price.” People losing their homes today often borrow more than 90%. And today’s unemployment rate, though rising, is 5.5%. In the Great Depression it was 25%.

Most Americans think their country is in a recession. But, buoyed by exports, output has yet to shrink for a single quarter. Mr Gramm suggested that his compatriots are suffering a “mental recession” rather than a real one….”

The article does not miss the important point that:

“….Consumers are facing a nasty squeeze, hit simultaneously by soaring costs for petrol, food and health care, tumbling house and share prices, tighter credit and flagging wages….have sent the overall inflation rate to 5% – higher than it was in 1992 when angry voters threw out George Bush senior.”

But the article concludes with the reality check that:

“Young voters have no memory of a serious recession, since the last one was in the early 1990’s. Some do not even realise that cyclical downturns are normal….”

Sarkozy scorecard:

With a new and glamorous wife who took the French and the world by storm (and attracted some bad publicity while she was at it) the new President’s popularity plummeted. However, the reform promised a year and a quarter ago in his election campaign is starting to slip almost unnoticed into law! Most surprising of all is that he seems to be managing it so far without the normal mass protests in the streets.

He had huge majorities in both the presidential and parliamentary elections – a mandate to deliver, and deliver he must or he will lose all credibility.

The promised reforms are mainly aimed at addressing France’s restrictive labour laws, thus combating unemployment, and streamlining the overweight and costly civil service. If he succeeds, and the signs are that he will, he is expected to jolt France into a welcome economic revival.

From The Economist again.

“He has time on his side. As part of the constitutional changes he got through parliament this week presidents are now limited to two terms. That in theory gives him until 2017. In many ways France, Europe’s second-biggest economy, will be decisive for the future of reform across the entire Euro area. Liberalisation in Germany is blocked by coalition politics; for different reasons, the leaders of Spain and Italy are disinclined to pursue it. But if France can successfully set the example, everybody else will be forced to sit up and take note.”

The Euro is strong (too strong perhaps) and France is resurgent in Europe and the world and the French people are expectant of positive change. It’s a good feeling to be there at the moment and although many would prefer that change could happen more quickly, there is little doubt that it is happening, and perhaps at a pace that is manageable.

Everyone remembers previous efforts at change that ended with an embarrassing government climb down after widespread and sometimes violent nationwide protests and strikes, but the unions are gravely weakened and the mandate given to Sarkozy to “fix France” was by European standards, a landslide.

An Investment Scenario:

(What it might look like on paper whether buying for yourself or as an income generating investment.)

A hypothetical two bedroom apartment in Cannes:

20 Year Mortgage
Cost of acquisition:            50% Mortgage    Self Funding    0% Mortgage

Purchase price property            € 500,000.00    € 500,000.00    € 500,000.00
Renovations            € 10,000.00    € 10,000.00    € 10,000.00
Total property cost            € 510,000.00    € 510,000.00    € 510,000.00
Furniture            € 15,000.00    € 15,000.00    € 15,000.00
Facilitation fee (2.5% of purchase price)            € 12,500.00    € 12,500.00    € 12,500.00
Transfer duties (Assumed at 7%)            € 35,000.00    € 35,000.00    € 35,000.00
Total cost            € 572,500.00    € 572,500.00    € 572,500.00

Mortgage            € 255,000.00    € 138,500.00    € 0.00
44.54%    24.19%    0.00%

Cash required            € 317,500.00    € 434,000.00    € 572,500.00

Estimated running costs        Rate per month

Tax fonciere        € 120.00    € 1,440.00    € 1,440.00    € 1,440.00
Tax habitation        € 120.00    € 1,440.00    € 1,440.00    € 1,440.00
Insurance        € 12.00    € 144.00    € 144.00    € 144.00
Levy – property        € 130.00    € 1,560.00    € 1,560.00    € 1,560.00
Water        € 18.00    € 216.00    € 216.00    € 216.00
Electricity        € 60.00    € 720.00    € 720.00    € 720.00
Repairs & Maintenance        € 70.00    € 840.00    € 840.00    € 840.00
Administration        € 119.60    € 1,435.20    € 1,435.20    € 1,435.20
Annual expenses            € 7,795.20    € 7,795.20    € 7,795.20
Monthly payment
Mortgage repayment at 5%    20 Years    € 1,552.95    € 18,635.40
20 Years    € 843.47        € 10,121.58

Total annual cost (incl. rental management & mortgage repayment)        € 26,430.60    € 17,916.78    € 7,795.20

Estimated rental income

Seasonal Rental    Azur Online Estimate less 10%    € 18,000.00    € 18,000.00    € 18,000.00
Annual Rental            € 0.00    € 0.00    € 0.00
Total Annual Rental Income            € 18,000.00    € 18,000.00    € 18,000.00

Returns (importantly ignoring taxation)

Net 1st year income            -€ 8,430.60    € 83.22    € 10,204.80
1st year income return on capital invested            -2.66%    0.02%    1.78%

1st year capital appreciation on purchase price & renovation cost, assumed at:    10.00%    € 51,000.00    € 51,000.00    € 51,000.00
1st year capital portion of mortgage repayments            € 7,617.64    € 4,137.43    € 0.00
1st year capital appreciation & contribution toward mortgage as % of capital invested    18.46%    12.70%    8.91%

Total income and appreciation            € 50,187.04    € 55,220.65    € 61,204.80
1st year net return            15.81%    12.72%    10.69%

This is simplified, but not far from reality for an apartment in this “average” category.

Capital appreciation has averaged about 16% per annum in Cannes and most of the Riviera for the last 6 years, but has averaged about 10% per annum over the last 60 years.

Assuming only a 10% capital gain, the net return of 51 000€ on the investment of 317 500€ is 15.81% on a 50% mortgage.

Put differently, the investor in this example has seen a real return on his 317 500€ investment of 15.81% over the first year and although he has been cash negative, his wealth has grown by around 51 000€.

That’s all for today.

As always, please let me know if you would rather not receive these Property Letters and I’ll remove your address from the list.

Please have a look at our website – comments would be welcomed:

With kind regards,


Properties in ascending price order.

•    The prices quoted are asking prices only.
•    The selection offered in the Property Letter represents a few properties chosen from many, so if what you are looking for is not here, we can tailor-make our search for you.

Rue Latour Maubourg.
Studio apartment.
•    33m² of living space.
•    1st floor.
•    Balcony.
•    Aspect, north.
•    Constructed in the 1970’s.
•    Asking price – 314 000€. (too much)

I include this because although it is too expensive, it is a good rental apartment. I think it worth making an offer because if we could get it for a reasonable price, it’s very well positioned in the heart of the Croisette, across the road from the Martinez Hotel. (It does not overlook the Croisette – it is around the corner on a side street). The apartment has been very recently and carefully renovated to a high quality, and is in a first class building. It has much going for it as a business rental unit for conferences and festivals, and as a holiday renter too. It has all the extras such as double glazing, air conditioning, electric shutters, and the building is looked after by a live-in guardian.

Rue Lacour.
Two bedroom duplex apartment.
•    65m² of living space.
•    1st & 2nd floors of 8.
•    Good 12m² wrap-around terrace.
•    Aspect – south and west.
•    Outside collective parking.
•    Asking price – 325 000€

Duplex apartment on 1st and 2nd floors of a good block in the suburb of Cannes just behind the Hotel Martinez. It is in an excellent building with a guardian. We have quite a number of apartments in this area and whereas they are not as easy to rent for congresses as the apartments right in the centre of town, they are nowhere near the price. They do well on medium term rentals. This apartment needs a renovation to freshen it and I think it would be hugely valuable to add a second (upstairs) toilet, and redo the kitchen. This is an apartment that one can add great value to by doing a good renovation. The price is very attractive indeed and may be open to an even lower offer.

Three bedroom apartment.
•    92m² of living space.
•    2nd floor of 4.
•    Small 5m² balcony.
•    3 bedrooms and two bathrooms.
•    View – of buildings in the Old Town of Cannes.
•    Fitted with air-conditioning, double glazing and satellite TV.
•    Asking price – 420 000€.

This apartment is very good value. It is situated just up the hill from the Old Port and is only a few minutes walk from the Palais des Festivals, the main shopping streets and the beaches. Wonderful situation! It has been renovated and furnished to a high standard for rentals to the conference and holiday markets. The kitchen is open plan and the living room spacious. The building is Bourgeois and the entrance and stairways and common areas are in very good condition. The apartment is very quiet – there is no lift but it is barley significant on the 2nd floor. A big advantage is that because of the age of the building, there are very low charges and levies, and the annual “tax fonciere” is very low indeed.

Three bedroom apartment.
Renovation opportunity.
•    92m² of living space.
•    2nd floor of 3.
•    Construction – 1900.
•    50m² of roof terrace.
•    Three large bedrooms.
•    Living room, separate kitchen, separate toilet.
•    Only one bathroom to date.
•    Views – the (pedestrian) street below, and buildings.
•    Cellar.
•    Asking price – 948 000€.

This high ceiling apartment in a well maintained and solid 1900 building has fabulous potential. It is right in the heart of Cannes amongst the shopping streets and restaurants, but quiet because it is on a pedestrian street. Remarkably it also has no vis-à-vis, meaning that no buildings look directly at or into it. There is both quiet and privacy! It is a short two minute walk to the Crosiette and the Palais des Festivals.

The unique point (one of many actually) is the terrace! It is 50 m² and relatively private – overlooked only by the 3rd floor of its own building. No other building overlooks this terrace which would be an absolutely perfect venue for entertaining groups of guests and business associates. Entertainment space is in high demand and this terrace is perfect. Privacy from the floor above (if it’s required) can be achieved simply by replacing awnings (old ones are there but need replacing) or by erecting a marquee tent for functions.

The apartment itself needs a complete renovation and the creation of a second bathroom. All of this is possible and the options are many and varied. In its simplest realisation it should become a three bedroom, two bathroom apartment with a guest toilet and a separate kitchen, large living room and the very valuable terrace.

Carre d’Or.
Two bedroom penthouse apartment.
•    100m²of living space.
•    7th floor of 7 – ON THE TOP!
•    55m² of wonderful rooftop terrace.
•    Two bedrooms with en-suite bathrooms.
•    Separate guest toilet.
•    Panoramic views including sea views.
•    Air conditioning, double glazing, guardian, etc.
•    Lock up garage in the basement.
•    Asking price – 1 170 000€.

This top floor apartment right in the “Golden Square” or “Carre d’Or”, with the heart of it being the famous Hotel Carlton is in excellent position. It is set right between the Croisette (read Carlton) and the Rue d’Antibes in a luxury building and the apartment itself is in perfect condition. It has a large living room and a separate kitchen, two lovely bedrooms each opening onto the roof terrace, two en-suite bathrooms and a separate guest toilet, and importantly in this part of town, a garage. The view is panoramic with some sea view.

This is a rare opportunity which has only just come onto the market. With this position, and being on the top floor it is not over priced, but as with the others, it is worth considering making a reasonable offer.

This selection appeared in my last Property Letter – I am including them again (in abbreviated form) because they are still available as far as I know and because I promised early in this letter to highlight properties that are worthwhile investments. For mote details and photos please follow the web link or ask me for details.

Palm Beach.
Third floor apartment.

•    28 m² of living space.
•    Looks west from 3rd floor.
•    View across Place de l’Etang.
•    Constructed 1970’s.
•    Asking Price – 170 000€.
•    Furnished

A little rental unit overlooking the Place de l’Etang – lots of charm. A foot in the door.
Attractive price.

Centre of Cannes.
Large Studio Apartment.

•    37m² of living space.
•    Fully renovated and ready to work as a rental unit.
•    Double glazed.
•    View of streets leading to the Palais des Festivals.
•    Asking price – 230 000 Euros.
•    The apartment is being sold furnished.

So close to the Palais des Festivals – a hundred meters or less. Very attractive price.

Village Sablons – Palm Beach.
One bedroom apartment.

•    One bedroom apartment.
•    35 / 38m² living space.
•    Small balcony at front and small closed in balcony at back. (Potential to expand this west-facing balcony and make more use of it.
•    Aspect – east and west.
•    Fully furnished.
•    Asking price – 235 000€.
A charming apartment – a “coup de couer”. Very attractively priced.

Place Vauban.
One bedroom apartment.

•    38 m² of living space.
•    4th floor of 4 (with lift).
•    Historic building – excellent condition.
•    Aspect west.
•    View of city and rooftops – absolutely no vis-à-vis.
•    Air conditioned and double glazed.
•    Asking price – 276 500€
Very tidy. Very good position in the centre for conference rentals. Make a lower offer or negotiate to have the furniture included in the price, or both.

Rue Borniol.
Three bedroom apartment.

•    78 m² of living space.
•    2nd & 3rd floors of 3.
•    Aspect south, west, north and east.
•    View of city and rooftops – no vis-à-vis.
•    Asking price – 319 000€.
Brilliant apartment at an exceptional price.

La Croisette.
Large studio apartment.

•    40 m² of living space.
•    1st Floor of 7.
•    Construction 1960.
•    View over gardens, La Croisette and the sea.
•    Exposition east, south and west.
•    Terrace.
•    Gated parking in the complex.
•    Air conditioned and double glazed.
•    Asking price – 385 000€.
The seller has accepted an offer of 320 000€ but the would-be buyer hasn’t signed. Motivated seller. This is a bargain now – assuming 320 000€.

Palm Beach.
Two bedroom apartment.

•    Two bedroom apartment.
•    One bathroom with toilet, separate shower and toilet.
•    Balconies east and west.
•    57m² of living space.
•    1st floor of 5.
•    Air-conditioned and double glazed.
•    Fully furnished.
•    Private parking.
•    Asking price – 450 000€.
Great rental unit – good value and ready to go to work.

Isola Bella close to Cannes centre.
Two bedroom apartment.

•    Two bedroom, two bathroom apartment.
•    Large east and south facing balcony.
•    78m² living space.
•    1st floor of 2.
•    Fully furnished.
•    Air conditioned and double glazed.
•    Garage and cellar in the basement.
•    Asking price – 550 000€.
Very good value now – very good long term rental unit very close to the centre.

Palm Beach.
Two bedroom apartment.

•    73 m² of living space.
•    Construction 1965.
•    1st floor of 5.
•    Aspect east and north.
•    View across the Place de l’Etang.
•    Large balcony.
•    Asking price – 598 000€.

This is still one of my favourites. Right on Place de l’Etang with a big overlooking balcony for entertaining or just soaking up the atmosphere and village life on the boulles courts below. Position is fabulous – need to negotiate the price a bit.

Rue du Lac.
Four / Five Bedroom apartment.

•    180 m² of living space.
•    4 bedrooms and 4 bathrooms.
•    Aspect south.
•    Sea view from top floors and balconies.
•    Balcony on 3rd floor and roof terrace on 4th floor.
•    Swimming pool (almost private).
•    Gym, sauna, and modern glass walled squash court!
•    Air conditioned, and with a very efficient fireplace.
•    Two garages in the spacious basement.
•    Asking price – 958 000€.
Very unusual opportunity. This is a real home in the centre of Cannes, but is a good renter too.

Plage du Midi.
Three bedroom apartment.

•    125 m² of living space.
•    35 m² of terrace.
•    Three big bedrooms.
•    Three en-suite bathrooms.
•    Built – 1900 (Bourgeois)
•    View – panoramic sea views.
•    Aspect – north, south east and west.
•    Floor – 2nd of 3.
•    General condition – excellent.
•    Double glazed and air conditioned.
•    Garage and private parking.
•    Cellar.
•    Private steps down to the beach.
•    Asking Price – 1 700 000€
This is still the one I’d like to buy – if it’s still available.
It’s got everything. I would recommend a reasonable offer.

Three bedroom apartment.

•    180 m² of living space.
•    “The” Classic building in the suburb of La Californie.
•    Constructed in 1900.
•    4th floor of 4.
•    Aspect south and north (traverses the building).
•    View panoramic.
•    Terrace.
•    Garage and parking.
•    Asking price – 2 150 000€.
Magnificent, prestige property. No question.

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