How will the luxury real estate market fare in 2023?

While everyone is scrambling to get their credit with rising rates, what about the luxury real estate market? Are millionaires affected by rising rates? Is this the end of the Kretz family, an agency specializing in exceptional real estate? A brief overview of the real estate market in the land of the ultra-rich.

Slowdown for French real estate

Unless you’re living in a survivalist bunker with no internet connection, you probably know that the real estate market is experiencing a general slowdown. In a year and a half, rate increase in fact, it still complicates itaccess to credit many potential buyers.

Who says fewer buyers means fewer sales (no joke?). In Paris in 1 year we observed a 17% decrease in the number of transactions. According to the president of the National Real Estate Federation (Fnaim), Loïc Cantin, this is the biggest drop in volume in one year since the end of World War II. Just that! You will be able to tell your grandchildren, “I was there”.

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The good news for buyers is that a drop in transactions means a drop in prices. According to The best agents, the capital saw a price drop of -7.6% since July 2020. Prices even crossed the symbolic threshold of 10,000 euros per m2. Never seen since 2019.

But if inflationary pressure weighs on the “classic” real estate market, what about the luxury sector?

Luxury real estate: what will the future be for the Kretz family?

Luxury real estate concerns 5% of the French population. That may be a detail to you, but compared to the population, it’s still a small group of people (and customers for the Kretz family).

It is the clients of this real estate agency specializing in prestigious goods (whose real estate adventures we enjoy watching on Netflix), are they also affected by rising rates? Another season of their reality TV”Agency”, will people cry on celebrity chats in the middle of a battle for their loan? We tremble in anticipation.

Enough irony. If we’re asking, it’s because everything isn’t necessarily rosy when it comes to luxury real estate. Paris’ luxury real estate market, which has been in excellent shape in recent years, is also suffering from rising rates.

Uh yes. Specialized real estate agencies have difficulty selling their “basic” housing. These family properties, with an average area of ​​80-150 m2 and whose price tops out at between 1.2 and 2 million euros, were nevertheless selling like hotcakes before the rate hike.

Moreover, even at the high end, prices are currently being negotiated hard. Times are hard for everyone, my poor Lucette!

Wealthy customers would therefore not be spared from the tightening of the rules for access to credit. Is it likely that the Kretz family will end up with lofts and castles?

Ultra luxury? He doesn’t know the crisis

Granted, that would be a pretty exciting plot point for the next season of The Agency, except it doesn’t actually happen. The inflationary context and rate hikes are weighing on the entry level… but certainly not very high.

To give you some context, this is very high-end real estate from 5 million euros, at prices from 20,000 to 40,000 EUR per square meter. It’s a bit like yogurt: you have to tell the difference between cheap natural yogurt (thumbs up) and creamy, airy dessert creams as sophisticated as the latest iPhone.

In short, you understand, we play in the big league here. And these luxury “big guys” have nothing structurally to do with rising rates. He pays cash for his private hotel 69 million euros without bothering with a bank loan like us mere mortals.

This is why the crème de la crème of luxury real estate is on the market: todo bem. Sales in France remain in good shape, mainly due to the return of foreign customers from summer 2022. Predominantly American customer base, closely followed by new Chinese and Taiwanese investors. Paris also remains a heartland city for the ultra-rich, who focus on historic districts such as Saint-Germain-des-Prés, Île Saint-Louis and the Golden Triangle. Unsurprisingly, Porte de la Chapelle does not appear in this ranking.

In short, the Kretz family still has good days ahead of them. It’s back for Season 4 in the heart of the Big Apple. We can’t wait to invite ourselves into New York’s penthouses and lofts to spy on America’s great wealth from our couches. I can’t wait, as they say, across the Atlantic!

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