Is there a downturn on the French Riviera?

As the worldwide property market continues to struggle, many had assumed places such as the French Riviera would be the first to fall but so far this has not been the case – at least on the surface!

While prices were actually deemed to have risen last year in some areas of France, to the surprise of many property experts, a little more investigation into this phenomenon reveals that all may not be as it seems. Under the surface there have been a number of issues coming together which could see property values in sought after areas such as the French Riviera fall substantially over the next few months. So what exactly is going on?

The French economy

While initially the French economy seemed to perform better than most within Europe there has been a marked reduction in the strength of the economy over the last few months. France is a country which depends heavily upon the tourist market, which is one area of the worldwide economy that is suffering a major downturn. This has obviously impacted upon the French economy and slowly but surely we have seen signs that the French property market is also coming under pressure.

A quick scan through the property pages may give the impression that prices have not fallen as far as other areas of the world but under the surface the situation is considerably worse than you might expect.

The French property market

France is a country of so many extremes with regards to weather, culture and terrain that it is very difficult to bundle the varying property markets into one. However, there is no doubt that the downturn has begun to kick in although the regional variations in price performances are enormous, although the French Riviera is one area which appears to be suffering from a number of factors

Foreign property investors

Due to the popularity of France amongst the tourist community there has been a very popular and lucrative property market in the country for some time. In some ways foreign investors have been the food that has fed the French property market, in many regions of the country, but with financial difficulties in the vast majority of countries around the world there are signs that foreign investors are pulling away from the French property market.

Slowly but surely this reduction in food for the French property market is starting to filter through and even people who had their properties for sale in the early part of 2008, and then withdrew them from the market, and now returning in their droves. When you also consider that the slowdown in the French economy has impacted local investors, the signs are not good for the French property market.

Exchange rate considerations

UK investors have for some time played a major part in the growth of the French property market due in the main to the close proximity to the UK and the growing number of cheap transport links to the area. However, the UK currency has collapsed over the last six months as interest rates have fallen from around 5% to the current level of 1%. With a strong likelihood that UK base rates could fall to around 0% many currency investors have been selling the pounds very aggressively which does not bode well for the future.

While the euro has also been impacted by the ongoing worldwide recession, compared to the UK pound it has been relatively strong. This has had a dramatic impact upon the spending power of UK property investors, and investors around the world, leading to a general reduction in demand and available finance.

Reality kicks in on the French Riviera

Some reason it appears as though French estate agents and connected parties had been unwilling to face facts regarding the prospects for the French property market in general. While the quoted 9% increase in French property prices during 2008 was very much taken with a “pinch of salt” by overseas investors, it would appear there was actually a small decline across the country during 2008, with a figure of 2% now being mentioned.

A number of leading French estate agents are now forecasting falls of between 6% and 10% in nationwide property prices during 2009 although there will be a massive range of property price performances when you bear in mind the various “hotspots” in the country, such as the Riviera. We are already seeing signs of property price reductions in the Riviera with buyers suggesting price reductions of up to 25% are available on the figures being quoted in sales literature. Whether this is a concerted effort by estate agents to try and support a falling market, or a delay in reality kicking in remains to be seen.

Prospects for the future

The French Riviera had seen an increase in properties for sale in the early part of 2008 but a number of these properties were taken off the market when property prices appeared to stay fairly firm. However, estate agents across the region have noted a substantial increase in sellers over recent months, many of whom have returned with substantially lower asking prices.

It is also worth remembering that for UK investors who have had a property in the Riviera for some time there is scope to reduce prices by anything up to 25% in Euros and still receive the same sterling value that they would have received prior to the property market crash. This is a fairly unique phenomenon and one which has not gone unnoticed by UK investors who have property in the region. However, it is sure to drag down property values in the region as a whole as UK investors (both buyers and sellers) do not have a monopoly on the local property market.


While on the surface the French property market as a whole appears to have performed very well during the ongoing worldwide economic downturn, official sale prices appear to be well out of sync with “real” sale prices – although the gap is reducing. Currency considerations are also having a serious impact, especially amongst UK investors, with the potential to drag the overall Riviera property market lower and lower in the short to medium term.

Finally we are now seeing signs of distressed sellers and distressed selling prices although there are fewer and fewer property investors looking for exposure to the region at this moment in time. While the consensus for the performance of nationwide French property prices in 2009 would appear to be a fall in the region of 10%, many are expecting falls much larger than this in high-value areas such as the French Riviera.

This is a market which is very much different under the surface to the one which is visible to the worldwide public.

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