Housing market aglow in City of Light

The Life: Luxury home prices are soaring in Paris, thanks in part to buyers from Bric nations.

Prices for luxury homes in Paris are on the rise. Thomas Coex / AFP

Better buy that quaint pied-a-terre on the Left Bank while you can still afford it.

Q&A: Paris charm or US bargains

Last Updated: June 10, 2011

Why are Paris prices going crazy? International buyers are tired of the roller coaster ride. They are looking for safe, stable places to stash their money and that means the old European capitals. London is popular as a financial centre, but Paris has its own charms.

Can Paris sustain these prices? Analysts think so. There is little new development in the city's most desirable neighbourhoods. And that means the finest apartments are attracting multiple offers, driving up prices.

Any other cities still seeing price increases? St Petersburg prices actually jumped 8.2 per cent in the first quarter of this year, after showing little movement in the first half of last year, according to Knight Frank. And Hong Kong prices are still going up, although not at the same rate. The city's prices rose only 6.4 per cent in the first quarter, even though they're up 15 per cent from a year ago.

Some analysts believe the best deals are found in the US, where prices are still dropping in many markets. Popular international cities such as Miami and Los Angeles have seen huge falls in recent years. But nobody knows if these markets have hit a bottom.

Are there any bargains in the world? XXX

Prices for luxury homes in Paris jumped 22 per cent in the 12 months to March this year, the biggest gain among the 15 cities tracked by the Knight Frank Prime Global Cities Index.

The City of Light has never been a bargain hunter's paradise, but "supply constraints" and growing interest from overseas buyers is driving up prices even more than normal, the property firm reports.

"Investors from Brazil, Russia, India and China are increasingly looking to Paris as a safe haven to invest funds in a mature and high-performing market," said Liam Bailey, the residential research director for Knight Frank.

In other words, it's starting to attract the type of activity already fuelling London's high-end neighbourhoods. London and Paris are starting to operate in their own rarified air, catering to wealthy buyers who are unconcerned by "affordability and macro-economics", the firm reports.

"These cities compete at a different level in attracting the world's wealthy elite," Mr Bailey said.

The price spurt in the European capitals is in sharp contrast to recent years when cities in Asia attracted headlines for gaudy price increases.

But government-enforced cooling measures are having an impact on Asia's markets, Knight Frank concludes.

Hong Kong, Shanghai, Beijing and Singapore posted an average annual price growth of 54.6 per cent in the first quarter last year, from 2009, compared with a more pedestrian 11.1 per cent in the first quarter of this year.

Other cities around the world are also struggling to find buyers, according to the Knight Frank index, which tracks high-end housing globally. Moscow was at the bottom of the list, posting an 8 per cent decline in the year to March.

New York, another city bolstered by international buyers, saw a scant 1 per cent increase.

But Knight Frank expects prices in Paris to continue to escalate.

Top 5: Hot cities

1 Paris, up 22%

1 Hong Kong, up 15%

1 Helsinki, up 12.2%

1 Shanghai, up 11%

1 Beijing, up 10%

Y-to-y price gain. Source: Knight Frank

An elite tier of global city markets is forming, "where the top addresses will become increasingly fought over by wealthy buyers" looking for long-term investments, Knight Frank reports.

The Quote: "An artist has no home in Europe - except in Paris." Friedrich Nietzsche