It seems only moments ago, yet last January, with our usual cautiously optimistic but pragmatic and reasoned approach, we wished and hoped for a “no Catch 22” new year. Well, it turned out there were some catches after all. We failed, along with many, to foresee Putin’s intentions. What followed was no surprise. Energy prices have risen, inflation has followed suit and money has inevitably become more expensive.
Almost all the buyers who retained us to assist them over the past twenty years or so, engineered their acquisition with funds in whole or in part financed by a charge on the property, principally for tax efficiency, usually with our assistance, and, virtually without exception at rates fixed throughout the life of the loan : rates which in the past few years have been derisory compared to today.
Should those owners, benefiting from low, locked-in rates, be rubbing their hands in self-congratulation? Or should they, au contraire, be wringing them? As rates increase, values surely decrease.
There is no entirely right or wrong answer.
Property is of course an illiquid asset and never more so than in the markets where we are expert. These are where the locations are most sought after, where historically the most rare and beautiful houses and estates have been created, where values are traditionally the highest and the least subject to fluctuation: comparatively few participants, comparatively low volumes of activity. These are the Teslas of French property, but unlike the investors who shorted the car manufacturer to the tune of 15 billion dollars last year, the buyers of these first-class properties are not and should not be looking for fast and furious profits, nor should they be taking similar risks. For them the joy of possessing a thing of beauty, the happiness generated by the serenity, comfort and convenience of dwelling in lovely surroundings, these are the drivers.
Their investment must nonetheless be protected.
Whilst they will not change hands as quickly or easily as a Tesla share, these properties will, by their very nature, retain and over time grow their true value. True value is the key. If the location is not quite top rank, if the present ownership structure has inherent weaknesses, if there is a question mark over planning, if the immediate environment is due to be modified, if there is a low-visibility drawback of any of a dozen possible categories the true value will certainly be less than the owner – or their agent – will claim.
Our message therefore in 2023 is that more than ever a complete understanding of what a property is really worth is paramount. More than ever, buying the best at the right price is the only guarantee of retaining value and seeing a return to gentle growth as the world settles down as we all hope it will. Sellers are beginning to understand that, too, so as far as our retained clients are concerned we have little doubt they will be rubbing their hands in 2023, as indeed they have been, with our assistance, year after year !