It comes as no surprise that the European Luxury Property market has been affected by recent events across the EU, notably BREXIT, the election of Emmanuel Macron and the Catalonian independence vote. Nevertheless, since the financial crash of 2008–2009, the demand in the luxury property market has remained high and we have seen a general trend in the increase of the number of transactions with the average asking price of property remaining high. However, a series of economic and political shockwaves experienced across Europe has resulted in some investors acting with caution in the traditionally popular cities of Barcelona and London.
For Ultra-High Net Worth Individuals (UHNWIs), residential property is still viewed as a safe, long-term investment. If coming from the Middle East, Russia and further afield, purchasing property in Europe offers their families a relatively safe, luxurious and stable base outside of their home nation. However, the announcement of BREXIT in the UK, coupled with adverse taxation changes for non-domiciled individuals, remittance taxes, and higher stamp duty land tax has resulted in a decline in market volumes in Prime Central London (PCL) as some investors choose Paris, Lisbon and parts of Switzerland instead. With lower market volumes over the £2 million mark, comes lower prices and market opportunities that are only seen every second or third generation come to light. And despite everything, London is still one of the world’s most attractive capital cities in the world in which to invest. Now ranked third in the BARNES Global Property Handbook, following behind New York and Paris, London has lost the top stop for the first time in 10 years.
The increased interest in France is mostly down to the election of Emmanuel Macron as President of France. Macron took over from a highly unpopular and widely criticised Hollande whose anti-finance stance proved to be incredibly unfavourable amongst UHNWIs. This stunted luxury property market growth across the country, but mainly in Paris and along the Côte d’Azur. By comparison, President Macron welcomes foreign investment into France and is praised for his liberal economic policies, leading to prices increasing by 20% in Paris. The number of transactions grew by more than 25% in 2017 compared with 2016. Whilst we remain optimistic for further growth of the French market, it should be noted that the government’s promise of replacing the former Impôt sur la fortune (wealth tax) with the revised Impôt sur la fortune immobilière (real estate wealth tax), has yet to come into effect.
Spurred on by the BREXIT vote, the Spanish province of Catalonia held a referendum at the end of 2017. Ultimately, the central Spanish government in Madrid condemned the referendum illegal. Catalonia declared its independence on October 1, 2017, a decision that resulted in widespread civil unrest in the region and in some cases clashes between civilians and the police. The resulting regional instability led to the vast majority of high value deals being withdrawn, mainly in Barcelona, although we did have a handful of sales fall through across the country.
As Spain’s richest autonomous region, property prices were consistently high year on year. This drop in sales volume has led to a reduction in property prices, and similarly to London, we are seeing a market correction. Not unexpectedly, the correction has generated interest in the region again, albeit slowed by comparison to pre-referendum sales. In the BARNES Global Property Handbook we identified that many property sales were concluded between 20% and 30% off the asking price in Barcelona, which provided foreign investors an opportunity to take advantage of lower prices in what is still a desirable tourist and business destination.