Property prices – an overview of 2007

In 2007 resale apartment prices in mountain destinations increased by over 13% in Haute-Savoie and 9% in Savoie. Chalet prices increased by 7% in Haute-Savoie and a huge 25% in Savoie, whilst land prices increased by 22% in Haute-Savoie and almost 9% in Savoie. According to the estate agency regulatory body FNAIM, the average price per square metre in Haute-Savoie and Savoie combined has now almost doubled since 2002 and currently sits at 4,844 euros.

The pace of the 2007 property market was slower than in previous years; late snowfall in the 2006/2007 season, the US sub prime credit crisis and subsequent impact on the UK housing market has impacted on the volume of sales in the tourist destinations where many buyers are British. However despite the decline in the overall volume of sales there is very positive news for both property owners and buyers; annual property price growth continues to be strong and properties that are priced at the correct market value are continuing to sell well. In the past there has been a trend of over-valuing in the French Alps and this has now ceased; ensuring that today’s property market reflects true values. Given the recent changes in the sterling-euro exchange rate there is more negotiation on property prices – the overall outcome being that the British vendor is able to capitalise on the weaker pound when they return their funds to the UK and the British buyer is able to secure a property without paying over the odds. Buyers are finding there is a greater choice of property for sale, although resort centres are continuing to record a rapid sales turnover and buyers still need to move quickly to secure their dream property.

Many buyers are investing in a number of new build apartment programmes that have launched across the region, notably in Flaine, Samoens, Les Carroz and Saint Gervais les Bains. As a result new build prices in key resorts have increased rapidly in the past 12 months and globally across the mountains by almost 12%.

Property price hot spots

Courcheval and Méribel in Savoie now top the list of prices per m² across France with Val d’Isère in fourth place behind Saint Tropez. These three mountain resorts form part of the Three Valleys and Espace Killy ski domains in Savoie, each domain attaining a respectable 6% and 8% growth respectively in resale apartment prices. Three resorts from the Haute-Savoie area are in the top 10 ; Megeve (6th), Les Gets (7th) and La Clusaz (10th) all claim the highest prices per square metre, at 6,227 euros, 6,212 euros and 5,606 euros respectively.

However to really get to grips with where the movers and shakers are in today’s property market you should narrow down the search and look at which ski resorts are showing the strongest capital growth rather than the highest price per square metre.

A recent report in the Savoyard paper Le Dauphiné Libéré confirms that the ski resorts of Haute-Savoie appear to be most profitable for today’s property buyer. The article reasons that the resorts of Haute-Savoie seem to be better adapted to the needs of buyers; property for sale in the region is more spacious and the resorts are more attractive for year-round pursuits. With less than 50% of tourists coming to the French Alps to ski it becomes increasingly clear why these destinations are starting to claim an advantage over their more expensive purpose-built neighbours. As Le Dauphiné Libéré confirms; the future of any mountain destination really hinges on their ability to anticipate and adapt to client needs. This successful approach is reflected in the impressive price increases experienced by many resorts in the Haute-Savoie area; the price per m² in Flaine/les Carroz has leapt up by 23% in the past year, La Clusaz by 22% and across the Evasion Mont Blanc ski domain by 22%.

Movers and shakers

Some of the resorts that are performing well have long been touted as property hotspots by the team here at Ascendant. Saint Gervais les Bains, Combloux and Les Contamines all performed extremely well in 2007 and it is our prediction that they will continue to grow in 2008. These destinations all offer the right location at affordable prices – buyers that used to seek property in the Chamonix Valley and Megeve and that have been priced out of these markets are now looking to nearby, connected resorts for their second home. The advantage of these 3 destinations is threefold: they are ideally located for easy access to Chamonix, Megeve, the rest of the region and Geneva Airport, they all provide easy cable car access to the vast Evasion Mont Blanc ski domain and they are all fully geared up towards year-round holiday activities. Add to this that both Saint Gervais and Les Contamines have some significant resort and infrastructure developments lined up for the near future and they are unlikely to remain some of the region’s best-kept secrets for much longer.

Les Carroz and Flaine prices have also performed well – resale apartment prices are up by 17.2% and new build apartment prices are up by a massive 32.2%. New build prices are mainly being driven by large scale development in Flaine (see our website for property details), which is drawing heavy investment in this snow sure and high-altitude resort. Certainly Flaine’s original trendy 1960s architecture does not bring to mind the quaint alpine chalets of years gone by; however new apartment and chalet constructions have been sensitively designed to marry contemporary and stylish with old Savoyard style and the solid snow records of the resort are continuing to drive demand. Flaine sits in a micro-climate generated by nearby Mont Blanc, ensuring that even in a bad season there is plenty of skiing to be enjoyed. Les Carroz continues to be a popular resort for buyers – the ease of access (45 minutes) from Geneva Airport is a major boon, plus straightforward access into the Grand Massif ski domain and a busy summertime season all appeal to buyers.

La Clusaz continues its meteoric ascent in resale apartments, with annual price increases of 22% year on year. Whilst this attractive resort is less well known amongst the British ski set it is well loved amongst the French skiing crowd and an extreme lack of property for sale and land to build on has helped to push up prices. The resort is a popular year-round destination, with one of the prettiest village centres in the Alps and easy access to Lake Annecy for the summer season. Locals from Annecy head up to La Clusaz for weekend breaks and their buying power also influences prices in the local area.

Interestingly it is many of the outerlying villages where the largest price increases are being experienced – predominantly because buyers are increasingly prepared to move out of the main resorts to achieve the size and type of property they dream of. Les Houches in the Chamonix Valley shows steady growth in resale apartments at 15.2%, whilst it’s larger and more popular sister Chamonix comes in with a lower but respectable 5.5% increase. Samoens in the Grand Massif has achieved annual price increases of 2.9% whilst the smaller, neighbouring resort of Morillon has grown by 8.1% year-on-year and Saint Gervais les Bains and Combloux both outperformed Megeve in 2007.

Who is buying?

Over the past 10 years British and other non-French buyers have had a huge impact on the market in Haute-Savoie. In 1997 92% of buyers in the area were French. In 2007 this figure fell to 75%. In line with this shift, British buyers represented 2% of the Haute-Savoie market in 1997 whilst 10 years later in 2007 their share has increased to over 18%.

In certain mountain resorts across the region the British form the majority of the buying market. In Saint Jean d’Aulps and Morzine in the Portes du Soleil ski domain British buyers accounted for 68% and 64% of property sales in the past 12 months, 45% in Les Gets, 44% in Flaine and 42% in Chamonix Mont Blanc. The highest concentrations of British buyers across the northern French Alps were in the Grand Massif, the Portes de Soleil, the Mont Blanc region and the Three Valleys domain. This comes as no surprise; Chamonix and Megeve have always held a huge draw for British buyers and Morzine, Les Gets and Samoens have all developed and grown massively over the past 8 years. These destinations are well placed to offer the quality and size of property that British buyers are seeking, combined with the allure of a year-round and attractive holiday destination. Add to this the appeal of a property that promises to generate strong capital growth and holds excellent rental potential - all at less than it would cost to buy in the UK and it’s easy to see why buyers are still entranced by the idea of a second home in the mountains.

Whilst many French buyers are looking for a main residence or a second home that they will hold on to for many years to come, the British are more likely to see their purchase as an investment property that can be resold for a profit within a relatively short time frame (typically 2-5 years). Spacious properties with multiple bathrooms are the order of the day for a British buyer and if it cannot be found in resale buyers will look to new build and renovation developments that offer versatility in layout and design to achieve their needs – over 29% of new build property sales in Haute-Savoie went to British buyers in 2007.

What are people buying?

In Haute-Savoie one sale in four is a property located in a mountain resort, in Savoie this increases to one sale in two. The Haute-Savoie market is globally less dependant on the second home buyer – the region supports many technological and manufacturing businesses and its proximity to the cities of Geneva and Lyon also draws many French and international buyers seeking a main residence. This helps to maintain a buoyant property market and provides a measure of security for buyers.

Apartments

In resale apartments the studio and the 1-bed are the most popular purchases, accounting for almost 74% of all apartments sold. In new build properties the most popular purchases are 1 and 2-bed apartments, accounting for 72% of all new build apartments sold. This is an interesting indication of buyers’ demand for larger properties which is also reflected in the size of resale versus new build properties – in 2007 the average surface area of a 1-bed resale apartment was 34m² whilst the average surface area for a 1-bed new build apartment was 40m².

Historically new build property was thought to be cheaper than resale; however 2007 prices show that new build property has taken the lead, with the average price of a new build apartment at 4,986 euros per m² versus 4,537 euros per m² for a resale property (a difference of 9.9%). Across the board the average price of a new build apartment was 60% more expensive than a resale apartment which is predominantly driven by the difference in size between the properties.

Both resale and new build apartments increased in value at a similar rate in 2007, with resale at 11.5% and new build at 11.7%.

Houses

Both resale and new build house sales show that the most popular purchase in 2007 was a 5-bed plus property (33% of all sales in resale and 54% of all sales in new build).

There are two significant differences between resale and new build homes. Firstly, the average plot size of a resale property is much larger – a clear indication of the current lack of availability of land to build on in the mountains. Resale properties are constructed on an average plot size of 2,664m² whereas new build properties are constructed on an average plot size of just 909m². Secondly the average price of a property is considerably higher in new build than resale. Good quality labour and construction materials are in high demand in the Alps and therefore build costs are higher than other parts of the country. As a result the average price of a new build home is 60% higher than that of a resale property. As with apartments this is because new build houses and chalets are bigger than resale properties, if you compare the price per square metre a new build home costs 35% more per square metre than resale. The difference may be slightly skewed because the resale figures include a proportion of renovation properties in the “1 to 2-bed” property category.

Both resale and new build houses increased in value in 2007, however new build far outstripped resale with a 26% increase in value versus a 9% increase in value for resale year on year.

Land

Constructible land for sale in mountain resorts is extremely hard to come by and therefore prices continue to show strong growth with a 19% increase in value year on year. 86% of all land sales in the mountains in 2007 were for private detached properties, 14% of land sales were for “lotissements” or co-ownerships of apartments or chalets.

The most common plot size sold in 2007 was in the 900 – 1,500m² range, which unsurprisingly is generally the minimum plot size required to build a detached property. The average price per square metre for land was 172 euros in 2007 – however in a central resort position buyers can expect to pay anything up to 400 euros and above for a plot in a prime location. Larger plots for sale are much rarer and this is shown in the premium a buyer is prepared to pay – the average price or a plot of 1,500 – 2,500m² is 430,542 euros, whereas the average price for a plot of 900 – 1,500 euros is 180,996 euros (229 euros per square metre versus 163 euros per square metre for a smaller plot).

Good news for both buyers and vendors

If you are planning to buy a ski or mountain property in the French Alps then there are many advantages.

You can be confident that you are buying in a region of France where property values continue to show significant growth. If you are considering buying a property in Haute-Savoie then you are also making a purchase in an area that is displaying it’s ability to adapt to the changing needs of today’s buyer – whether it is by providing more spacious property or developing more resorts into year-round holiday destinations. If you are considering letting out your property to generate a return on your investment then you know that the majority of the resorts in the area have busy summer and winter seasons and because they are not purpose built they also have immense French and more specifically alpine character and charm.

The region’s proximity to Geneva enables the majority of the resorts in the area to be reached within 1 hour of the airport which continues to be a big plus for British buyers. Geneva and the Mont Blanc tunnel also draw many Swiss and Italian second home buyers into the region as well as the British. An increasing number of clients are also now considering settling in the area permanently, whether it is because they plan to work in Geneva or because they are able to split their time between working from home in the Alps and travelling back to the UK via Geneva Airport.

Most importantly of all a property purchase in the French Alps is about achieving a better quality of life. The Haute-Savoie region of France is the country’s most popular tourist destination and this is unlikely to change. Beautiful surroundings, the charm and character of an older way of life and the ability to simply get out and enjoy some of the best winter and summer sports going continues to draw both buyers and visitors from all over France and the world.

Vendors are often in the very fortunate position of knowing that they have made an excellent financial and personal investment. They have had a holiday or permanent home in a fabulous part of the world, enjoyed the best that France has to offer and to cap it all off nicely they have made a good profit on their purchase. Vendors that are selling their property and taking the money back into the UK also have the benefit of the strong euro to enable them to capitalise on their investment further.

What's in store for the next 12 months?

We predict that the next 12 months in the Haute-Savoie property market will show stable growth without a major peak in property values across the region globally. Key mountain resorts that are showing heavy investment from developers and town halls will continue to perform well. Many buyers will consider a smaller property investment initially, with plans to sell and upgrade into a larger property when they feel that the UK economy is stronger. The region will continue to draw plenty of interest from British buyers who will be more inclined to negotiate harder on property prices.

The value of the pound is not anticipated to strengthen before the final quarter of 2008 and this will obviously impact on the budgets of British buyers throughout the year. Vendors that are returning their euros to the UK should consider being flexible on the asking price of their property and take advantage of the strong euro to recover the cost of the negotiation.

Buyers that are considering buying with a UK mortgage or cash should also consider a French mortgage. Typically interest rates in France are lower than in the UK and most banks are now happy to lend up to 85% of the sale price of the property. As well as vastly reducing the amount of sterling that a buyer needs to bring to a sale up front, this will also enable property owners to make small monthly repayments, during which time the sterling-euros exchange rate may improve.

Buyers can also fix their euro exchange rate for their mortgage repayments with a currency exchange company for a 12 month period or longer, this will enable you to budget exactly how much you will be paying each month and avoid the pitfalls of any further decline in the exchange rate.

For more details about the alpine property market, how to buy ski property in the French Alps or to find out more about the property we have sale in the French Alps please contact us on +33 (0)4 50 10 44 23 or 0844 555 32 74.

To view property for sale in the French Alps click here.

Sources: FNAIM, Dauphiné-Savoie, Notaires de France / Perval

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