Covid-19 and Biarritz Market Summary 2020
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As everyone already knows, 2020 was and still is a wild ride of emotions. The COVID outbreak, economic instability, and social injustice worldwide made these last 12 months anything but a typical year. Like everywhere else in the world, our small community here in Biarritz has also felt the effects. However, the results have not all been negative. The real estate market has been very dynamic this year in our area, and we expect it to continue into 2021. Nevertheless, the COVID impact on the tourism and hospitality sectors should not be underestimated; we have still not seen the pandemic's full effects on the economy. Given all that has taken place in 2020, Biarritz's real estate market has seen high prices and high transaction volumes that continue to rise.
Early 2020 and 1st confinement
Early in 2020, the property market was already climbing here and throughout most of France. According to the statistics from the Notaries of France (www.notaires.fr), property transactions and prices have been steadily increasing since 2017. In Biarritz, we saw a high demand for city center properties and apartments. "A life on foot" was the most demanded search. On the other hand, requests for properties on Biarritz's limits, like in Arbonne and Arcangues, saw less demand (but still good) and longer times on the market.
However, when COVID arrived in France, all of this activity came to a halt. The property market came to a grinding stop. Agents and agencies went into protection mode for current sales and deals. Sales signatures were postponed due to confinement, and a special extension clause was granted to buyers who were in the process of purchasing. The work of an agent was about reassuring recent buyers and sellers while finding creative ways to continue. Buyer inquires were few and far between, and sellers were worried that they would need to drop prices. Fortunately, this did not happen.
A few weeks after the lockdown started, we saw a massive push to digital by many property market players. This push meant embracing virtual visits, electronic signatures, video conferences, and overall rapid adoption of digital processes. But during the confinement, no one knew what the market would look like once we were allowed to work normally. Would the market be decimated entirely? Would anyone be able to borrow money from the banks? No one knew.
Post confinement boom
After the confinement was over, we started to get more clarity on the situation. In late May and early June, we began to see things change here in Biarritz. The phones started ringing, and the market started moving again.
At first, we believed it was just pent-up demand and backlogged transactions pushing the market forward. But a curious trend first caught our attention and was soon seen around France as well. Buyers were looking for houses with a garden with a bit of living space rather than a city center "life on foot." There was a flight from the city centers and a push to the suburbs or countryside. Homes we previously had difficulty obtaining visits soon were scooped up, some even without negotiation.
One theory for this rapid change was that people who were previously confined to a small space in the city center for months now dreamed of having living space and being away from masses of people. And if we were to be confined again, they wanted an escape from the confined spaces of Paris, Bordeaux, and other larger cities. Living space had become a more significant commodity.
Furthermore, we saw another interesting trend, specifically in the luxury market. With the instability of the markets and economy from COVID, the property market became a clear refuge for investment. France has long had a strong history with property investment, and many clients saw this as a haven for their cash as they retreated from the stock markets. No longer feeling confident in the world markets, we had many clients looking to place their money in a quality property that would hold its value.
June through August is the high season for property here in Biarritz, but this season was a standout. Many agencies were reporting high demand, and lots of buyer offers came flooding in. There was a flurry of activity, especially for more modern homes with a garden, garage, and easy access to the city. Buyers favored projects ready to "move in," and we saw less demand for renovation projects or complicated transactions. Quality properties that were recently renovated or constructed would see multiple competing full-price offers within days of listing.
Despite the flurry of activity, we also saw many transactions canceled for one reason or another. Some buyers felt the pressure of the active market and the world's instability still reeling from COIVID. Furthermore, banks were starting to become more strict with loan criteria, and buyers found it increasingly difficult to get home mortgages. These factors led to quite a few offers never reaching the sales contract's signing. Overall, the vast majority of transactions were completed in a standard timeline, and most canceled transactions soon found another buyer.
2nd Confinement
The market moved along even after the summer season here in Biarritz. Of course, there was less activity after the tourists had returned home, but the market was stable. That continued until our most recent 2nd wave and 2nd confinement in November.
This 2nd confinement has been a bit different than the first. Not being a complete confinement, agencies could still work but not make physical visits to homes. The confinement also came at a time of low inventory of homes on the market following the summer's high activity. Low inventory plus the lower demand has slowed things down compared to the action of the summer. But the demand for modern homes with a garden still exists, and the trend continues towards the suburbs and countryside around Biarritz. As we start to "de-confine," we have seen transactions beginning to rise again. However, it is too early to see what will happen over the holiday season.
2021 Predictions
As we all know, it isn't very easy to predict the future. Still, we see the following trends continuing if we stay on a relatively normal path and the vaccine arrives early next year;
Quality of life - The first trend worldwide is the adoption of remote work even for more traditional office jobs. We heard from many clients who now can work remotely that they wish to leave the big cities to pursue a better quality of life in a smaller city or environment. They no longer feel tethered to a large city in order to continue their career. Biarritz has a unique draw during this period of time, given its many unique advantages. For example, the area is large enough to have high-quality conveniences and facilities but small enough not to have endless traffic jams or high crime rates....not to mention the beautiful access to nature and beaches. Furthermore, the area is quickly accessed by strong travel connections from the TGV and the local airports. Commuting between Paris, Bordeaux, and most other large cities remain efficient and cost-effective. Biarritz has a unique quality of life that is not easily found elsewhere in the world. So for 2021, it's reasonable to believe Biarritz will continue to receive demand from families looking to escape the city centers searching for the quality of life found here.
East to West - Another smaller trend, but interesting nevertheless, is the growing popularity of the Atlantic coast compared to the ever-popular Côte d'Azur. Traditionally, most buyers in the luxury and second home market first thought of buying in France's southeast and for many good reasons. However, with the rise in prices, population, and security concerns, we see more and more clients move their search to the Atlantic coast, with the greater Biarritz area becoming one of the first on their list. When we look at the total luxury offerings in the area, the Atlantic coast indeed has less total luxury offers available compared to the Côte d'Azur. Over the last few years, we have seen this offering begin to rise to match the demand.
Interest rates - The average interest rate for mortgages in France is between an astonishing 1% and 2%, with some even below 1%. Compared to other countries, these are some of the lower rates in the world. The effects of this on the economy are debatable, but it allows buyers to purchase more expensive properties than average. As a result, it gives them more buying power, increasing demand, and pushing home prices. Buyers are borrowing money extremely cheap and with good help from the government as well. Even foreigners can take advantage of these rates if they are a resident of France. Keep in mind that the stamp duties and taxes (around 7-9% of the purchase price) on homes in France add an extra cost.
In Conclusion - Overall, I see the Biarritz area property market remaining strong or, at the very least, stable. If the COVID vaccine comes on time and the restrictions are removed, we could very well see a boom in both tourism and property markets. Now is still a great time to purchase property in the greater Biarritz area and benefit from this unique area's exceptional quality of life.
