June 22 (Bloomberg) -- Paris’s housing market is stalling as buyers are deterred by record prices following two years of gains that outstripped London and New York.
Average prices fell by about 3 percent in the first five months of the year, according to an index compiled by Databiens.com based mainly on reports from the city’s affluent western districts. While it’s the only gauge so far to register a drop, other indicators show that transactions are falling and the time it takes to sell a property has almost doubled from a year ago.
“The flow of money, which was almost euphoric, has halted,” said Laurent Lakatos, the founder of London-based Databiens. “There’s been a pickup in the number of apartments offered at a discount.”
Home values in the French capital appreciated by about 20 percent last year, the biggest annual increase since at least 1991, the Paris Chamber of Notaries estimates. The surge in demand lifted prices across the city to a record as fewer owners offered their houses and apartments for sale and only 2,785 homes were built.
Personal finances are being stretched in Paris as interest rates and energy costs rise. In the last quarter of 2010, the cost of buying a home in the city rose at the fastest rate relative to average national disposable incomes since World War I, government figures show.
First-time buyers are turning to lower-priced neighborhoods in the northeast of the city or the suburbs, according to the Paris Chamber of Notaries. High prices are also deterring potential landlords because they diminish rental income returns.
“We are starting to see asking prices come down because properties aren’t shifting,” said Sebastien Kuperfis, a director of his family’s Junot Investissements brokerage chain, which covers the neighborhoods at the foot of Montmartre. “We are telling sellers to be more realistic in pricing.”
The average price of a Paris apartment fell to 8,885 euros a square meter in May from 9,165 euros at the end of 2010, the Databiens index shows. The figure includes the standard 5 percent broker’s fee. A two-bedroom apartment currently costs about 753,000 euros ($1.08 million), it estimates.
Home prices in London and New York were little changed last year based on prices per square foot.
The number of properties sold fell by 12 percent in the first quarter from a year earlier, according to Paris Chamber of Notaries figures published last month. Transactions are 24 percent below the average for the quarter from 1999 to 2007.
Laforet Immobilier, France’s third-largest property broker by number of outlets, said its employees took 42 days on average to sell a home in Paris in the first quarter, up from 23 days a year earlier.
The market for non-prime properties has slowed because sellers are holding out for higher prices while buyers are seeking discounts of as much as 15 percent from asking prices, said Sebastien de Lafond, the founder of property brokerage website MeilleursAgents.com.
“Sellers still have the 20 percent annual growth figures in their heads,” he said in a telephone interview. “We have probably reached the peak in terms of prices” and some owners of non-prime properties may need to lower asking prices by as much as 5 percent in order to sell them, he said.
Lafond’s index hasn’t shown a drop in Paris values, though monthly growth has slowed to 0.8 percent in April from 2.4 percent in January.
Price Gap Widens
Price differences are widening between the most desirable locations and less sought-after properties, a sign that the market is cooling, according to Michel Gouache, director of the TGA brokerage in Paris’s 13th district, or arrondissement.
Owners of a 102-square-meter (1,100-square-foot) apartment in the Latin Quarter had to cut the price by 11 percent to sell it, Gouache said. The property, on the third floor of a building overlooking the Paradis Latin cabaret tourist attraction and needing refurbishment, sold for 1.02 million euros, or 10,000 euros a square meter.
By contrast, Gouache sold a similar apartment on nearby Quai Montebello for 1.98 million euros, or 16,065 euros a square meter. The sale price exceeded an initial estimate he made six months earlier by 15 percent because of its prime location, overlooking the river Seine and with views of Notre Dame cathedral, he said.
Prices of luxury homes in Paris rose at the fastest rate in the world in the first quarter, according to an index compiled by London-based broker Knight Frank LLP. Properties there worth more than 2 million euros appreciated by 22 percent from a year earlier, faster than in next-placed Hong Kong, Helsinki, Shanghai and Beijing, the firm estimated.
“The polarization in the pricing marks a turning point in the market,” said Gouache, who has sold properties in the Latin Quarter and neighboring 13th arrondissement for 29 years.
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