Arab, French business ties deepen

Arab-Franco relations appear to be intensifying as more Arabic investors scour Paris for summer retreats and French companies win contracts on some of the Middle East's most prestigious projects.

With nearly 80 million visitors a year, France is the number one attraction for global tourists. On average, approximately 500,000 Arabs from the Middle East visit the country each year.

In recent times more and more Arabs are opting to buy their own piece of French property, with Paris proving popular as a summer retreat.

"The Avenue Foch area of Paris is possibly the area that has generated the most interest and in the South of France Cannes has proved popular. Most clients like a degree of privacy with access to good restaurants and shops," says David King of Winkworth France, a British-based real estate agency.

"As the Dollar continues to strengthen against the Euro more Middle Eastern buyers are showing interest in Europe," says James Geddes, Head of Property Vision in the Middle East.

"In Paris, top-end properties are between 40-50% cheaper than London, and buyers from the Middle East are attracted by the large size and grand style of the properties," adds Geedes.

A lot of France's ex-colonies are in the Middle East and therefore historically there was always a lot of Syrian and Lebanese buyers in Paris, says Nigel Hindle, Director of Property Vision France, however the recent favourable currency changes has seen more interest among Gulf-based investors.

So what are Arab investors looking for in Paris? Property Vision, a subsidiary of HSBC, reports that Arab buyers generally opt for large apartments ranging in size from 250 to 500 sq m, priced from US$5-13 million.

France has a wealth tax but Hindle reports that this is not an obstacle for Arab investors as they can get around this by moving their money around European banks.

Wealth tax

This is done by lodging cash with a bank in London or Switzerland and borrowing money from a French bank. The difference between the interest earned and paid is often less than the wealth tax they would have to pay initially.

However, while the French market may be cheaper and more stable than other European markets it does not, however, offer the level of growth that Arabs are accustomed to at home.

"The French market across the board has definitely slowed down and we expect that in 2008 it will end up with flat or modest growth of 0-2%," says John Crawley of the Oui Can Do real estate agency.

Crawley reports that French builders have begun to cut back and the top five builders have reduced construction by about 20-25% in response to current conditions.

Paris property market

While the general French market is stagnant Crawley says that the Parisian market is still performing well. He predicts that growth in Paris will be about 5-6% and as high as 9% in some of the upmarket areas where it is still a sellers' market.

In the Côte d'Azur, Crawley says it is possible to get bargains as a lot of Russian and Italian investors are exiting the market and prices being obtained are about 30% below what was possible a year ago.

While Arab buyers did buy property in Cannes and the Côte d'Azur in the 1980s, Hindle reports they are currently more likely to focus solely on Paris.

As 55% of French people rent rather than buy the rental market is still buoyant and Crawley reports that yields are still strong at about 4-5%, should Arab buyers wish to rent out their luxury hideaway.

In late 2008, the French Government introduced plans to reignite its property industry, consisting of interest-free loans for energy- efficient homes and Crawley believes that Sarkozy's plans have been well received.

The French property market is in much better shape to weather the current storm, says Crawley, as French banks have not been as highly leveraged and prices did not go up and down as dramatically as in the UK.

Not all Arab buyers in France have had a smooth path to Paris, as Qatar's Sheikh Hamad bin Khalifa Al-Thani has found.

In 2007, Sheikh Hamad bought a 17th-century mansion on an exclusive island on the River Seine for approximately US$112 million. The Sheikh plans to add an underground car park, elevators and additional rooms.

However, Paris' Mayor Bertrand Delanoe recently wrote to the French Culture Minister objecting to the Sheikh's plans, claiming they were "a real threat" to the city's heritage.

While Mayor Delanoe may have potentially soured Arab-Franco relations in the short term the two countries have enjoyed a healthy relationship in recent years.

Some of France's largest and most respected design, construction and architectural firms have been active across the Middle East.

The French Trade Commission reports that UAE-France bilateral trade is currently valued in excess of US$6 billion, with 80% made up of imports from France.

Louvre Abu Dhabi

At the INDEX 2008 exhibition in Dubai the number of French companies exhibiting soared by 70%, with 90 companies making the trip, compared to 53 in 2007 and 43 in 2006.

The majority of exports are furniture, fittings and interior design products and services and this perhaps indicates that Middle East homeowners are big fans of French style and fashion.

France and the UAE's relationship also garnered worldwide recognition with the announcement that Abu Dhabi's Saadiyat Island mega project would include the Louvre Abu Dhabi, the first Louvre museum outside Paris.

READERS' COMMENTS

MORE FROM ARABIANBUSINESS.COM