Title: “Paris Real Estate Market Puts a Strain on Finances, Leading to Decreased Sales and Revenue Loss”
Paragraph 1: Our series “Paris Real Estate Puts a Strain on Finances”
At least 300 million euros lost, a tough blow for the City
Between Macron and Hidalgo, a round 2 that could fizzle out
Paragraph 2: The “Family Jewels” Paris is Letting Go
Will the real estate crisis also hinder the sales of buildings or land that the City of Paris relies on to fill its coffers? And thus, further deepen its deficit? This question deserves to be asked as even luxury real estate is experiencing a slight pause in transactions.
Paragraph 3: These sales have brought in 632 million euros between 2018 and 2021 in the city’s accounts. With a peak revenue of 260 million euros in 2018. But this market has been less prosperous for a few years now.
Paragraph 4: Last year, in front of the Paris Real Estate Council, and in a document we obtained, Deputy Mayor in charge of finance, Paul Simondon, noted a decrease in sales since the beginning of the new term “due to successive crises (health and economic) and the instability of the international context.” Between 2020 and 2021, the City only received “only” 215 million euros in revenue from these sales.
Paragraph 5: “For prime real estate, there are always interested buyers”
Could the downturn in the real estate market further exacerbate this slowdown? “It is worrying in the short term, and we are vigilant about the impact it can have on DMTO (transfer duties, or notary fees, collected by local authorities on each real estate transaction), as are all departments, but not on the valuation of our assets,” believes Emmanuel Grégoire, deputy mayor of Paris.
Paragraph 6: “I do not speculate or make predictions. But I observe the market, there is a slowdown in transactions and prices are no longer increasing as they did before,” notes Alain Caumeil, director of the National Directorate of Property Interventions (DNID). “But when you have prime land sold in high-demand areas, there are always interested buyers,” adds this public finance administrator.
Paragraph 7: Stated objective by the City: 150 million euros in revenue per year
The opposite would be bad news for the executive’s budget strategy. Because the City of Paris needs these revenues from the sale of its real estate assets to finance a portion of its investments.
Paragraph 8: “We aim to achieve 150 million euros in revenues generated each year through these sales. It is sometimes difficult to achieve because there is a sort of seasonality. Some years we sell a lot, others less,” admits Emmanuel Grégoire.
Paragraph 9: In 2022, the City has only received “only” 87.39 million euros, while at the beginning of the term, the municipality had set a goal to accelerate the pace of these sales. “We must achieve it because it is unnecessary financial immobilization. These financial assets have no value and, above all, they deteriorate,” emphasizes the deputy mayor.
Paragraph 10: They even represent a significant cost to the City’s coffers. Because empty properties mean risks of squatting and/or degradation. The City is therefore forced to hire security companies to protect them, resulting in hefty bills. “Guarding a property 24 hours a day costs 200,000 euros per year. On the scale of the City, it is sustainable but unnecessary,” observes Emmanuel Grégoire.
Paragraph 11: “Family Jewels” Being Sold at a Bargain?
So when the opposition accuses the City of selling the “family jewels,” Emmanuel Grégoire sees it as good management. “We have the image of real estate assets with a positive value dynamic, but that is false. If it is not used, not properly maintained, or even maintained when it does not serve the public service of Paris, then it is money spent for nothing,” argues Anne Hidalgo’s right-hand man.
Paragraph 12: Another reproach regularly made by the right-wing opposition: the City is selling its assets at a low price. It does indeed sometimes sell its luxury properties below market value, as it has just done for a building located in the “Golden Triangle” of the Champs-Élysées.
Paragraph 13: Purchased seventeen years ago for 17 million euros, the building located on Avenue George V was the subject of heated debates within the majority, between those who wanted to sell it to the private sector to fill the City’s coffers and others. It will finally be sold to social housing organization Paris Habitat for 40 million euros, while market prices may have allowed for a higher price. However, none of the real estate specialists interviewed were able to estimate its current value.
Paragraph 14: A political choice embraced by the executive. “We could have sold it at market price, and that would have represented a very large sum of money. But providing social housing in these areas through preemptive purchases is expensive. So we decided to sell the building to Paris Habitat below what we could have obtained. And, in the end, the building will remain within the City’s assets,” defends Emmanuel Grégoire.
Paragraph 15: A sale validated by the National Directorate of Property Interventions. “The transaction can be slightly below market price,” explains its director. “What is prohibited is selling a public asset at a very low price.” It all depends on the type of project the buyer has. “If a municipality deviates from the domain value, there must be a justification: the creation of social housing, or when there is a motive of general interest with benefits for the community,” details the specialist.
Paragraph 16: More than 500 Properties Outside of Paris
However, the City’s real estate portfolio is not limited to exceptional properties located in upscale areas of the capital. Although it is not easy to define. “The City lacks transparency regarding its real estate assets,” regrets David Alphand, LR representative for the 16th arrondissement and vice-president of the Paris Real Estate Council.
Paragraph 17: Despite this, the municipality has several upcoming sales projects that are far less “prestigious.” Such as a parking lot at 153 Rue Nationale, in the 13th arrondissement, estimated to sell for 9.8 million euros. Or a plot with a small 200 sqm building and an empty courtyard/garden since 1995 at 10 Rue du Docteur-Laurent, in the 13th arrondissement, estimated at 697,680 euros.
Paragraph 18: Not to mention the other properties it owns outside of Paris. In 2021, the City still had 19,000 properties, 514 of which were outside of Paris, in 27 different departments. And it plans to sell three plots in Trilbardou, in the Seine-et-Marne region, including one with a 324 sqm house in very poor condition, for a price of 90,000 euros. It also plans to sell 5.7 hectares in the Yvelines region in the municipalities of Triel-sur-Seine, Carrières-sous-Poissy, Andrésy, and Chanteloup-les-Vignes, for a sale price of 381,425 euros.
Paragraph 19: Sometimes, these properties are the result of donations and other bequests with complex easements that can be difficult for the City to maintain. The City then chooses to sell them but does not always publicize it. The reason given is the need to negotiate each project in advance with the majority municipality of the respective community, which may not always agree on the strategy to adopt.
Paragraph 20: Within the majority, members of the Communist and Green parties sometimes question the appropriateness of these sales. “Why sell sites that hosted vacation camps? We may still need them for Parisian children or, why not, for unaccompanied minors,” notes Fatoumata Koné, president of the greens in the Paris Council.
Paragraph 21: These elected officials are also very discerning about potential buyers and their projects. “We prefer that the properties be resold to community organizations rather than private individuals and that real estate projects align with environmental challenges,” insists the representative from the 19th arrondissement.
Paragraph 22: Occasionally, these
