Chunnel vision

Have a toehold in both Paris and London, suggests Gerald Cadogan

The other day, a good friend asked me where he should look for a property investment. He has a gain that must be rolled back into property within the coming year to escape demands from the Inland Revenue, but nothing so far had seemed quite right to him. The Cotes and Costas did not enthuse him, nor was he convinced about the wonders of provincial France. True, cheap flights from the UK to regional French airports have done wonders for local property markets, but my friend worried about the long-term impact of environmental concerns.

My answer? King's Cross and Paris. In 2007, when Eurostar comes into St Pancras, next to King's Cross, there will be a direct connection between the two cities and King's Cross prices will have risen. At present, however, it is a still run-down part of London. It is highly central, relatively cheap and change is just getting under way. Prices have nowhere to go but up.

And why Paris? That is easy. Buy an apartment there and you can use it yourself in gaps between the tenants. Prices 'continue to hold their value, despite the high euro and the usual political uncertainty,' reports the Paris agent Philip Hawkes. He recalls an American client who said 30 years ago, `Ah, la conjoncture. I can't remember a time when there hasn't been an economic or political crisis here.'

Tarts and drugs and associated enterprises used to be the big deterrent against living around King's Cross, but it is different now. Two shops still sell 'books and videos' at the bottom of York Way next to the station, and there is another at the bottom of Caledonian Road (Blue Eros, next to the Beano Café). But locals agree that the sleaze is being pushed out of King's Cross. Even the police are suddenly obvious and zealous and have set up a 'police office' across the road from the railway station.

So the area now has the chance to (re)gain the standing it merits. It is packed with good Georgian houses and Victorian industrial and Edwardian public buildings, many in a tatty state, desperate for a fix. It could not be better placed for bus and Tube (far better than Chelsea and Fulham), the train to Scotland and the North, and soon

Paris and Brussels. And it is an easy walk to academic, legal and medical London, the Spectator offices and the British Museum. The British Library is on the doorstep.

King's Cross suffered six years of planning blight while the Channel Tunnel rail-link was under discussion, but regeneration is now steaming ahead. In the vanguard is P&O Developments' Regent Quarter scheme, covering a 5.8-acre block immediately east of the station. This used to be full of warehouses and workshops that grew up alongside the tracks, including stables with ramps for the horses and even an equine infirmary. But P&O is now turning them into flats and loft-apartments as well as a hotel and social housing under the Peabody Trust.

Regent Quarter will 'lift the area'. says Danny Lachs of the agents Hurford Salvi Carr (020 7566 9444), who specialise in advising investors in the City and its surrounds, 'but the rise in values won't happen overnight'. He advises taking a view of between three and five years, by which time Regent Quarter will have settled in and the Eurostar terminal will be operating. But early birds who bought into Regent Quarter when it was launched in late 2002 should be able to move in or put their flats out to let by about now. They

also have got the best prices by buying offplan — from the drawing board. That always takes imagination and courage, but it pays off with a good scheme.

Another tranche of the 107 units for private sale is now on offer at prices from £295,000 for a one-bedroom flat, £385,000 for two bedrooms and £467,500 for three. Buyers are mostly investors and childless owner-occupiers. They tend to be either in their twenties or nearing retirement (when the travel links matter especially). Many are north Londoners who want to stay in the area. A few inquiries have come from Paris: expect more as Eurostar approaches. Meanwhile, the imminent arrival of residents will spur sales to those who do not like the idea of buying off-plan and must see something physical before they commit. Call Regent Quarter on 0870 240 4227.

The alternative is to buy a Georgian terrace house in one of the surrounding streets, do it up (which may mean a lot of work) and rent it out while you wait to sell on in about five years' time. Balfe Street, east of Regent Quarter, would be ideal. Agent Daniel Ford (020 7713 0909) has sold a two-bedroom maisonette there for just under £250,000. A whole house is probably about £430,000, says the firm's Chris Fordjour. But there is a hitch. There is little on the market, because owners are waiting to see how Regent Quarter will raise prices. It might be easier to look a little further away but still in the King's Cross nexus, such as up the hill in Percy Circus (where a blue plaque says that Lenin stayed in 1905) or in Wharton Street.

In Paris, demand for good family apartments is pushing the price up 10-15 per cent a year, says Charles Daireaux at the Hawkes agency, 'especially in the bourgeois quarters, the 7th, 8th, 16th and 17th arrondissements'. Leonard Weill of L. Weill Paris Real Estate concurs. 'Most expensive of all, at 7,500-10,000 euros a square metre [Paris prices are regularly per square metre], are the 5th, 6th and 7th, and the Ile St Louis'.

A micro-marche doing exceptionally well is in the streets around the Parc Monceau (17th), where children can play and perhaps attend the nearby Ecole Bi-Langue. Offthe-park prices reach 6,500-7,500 euros, while overlooking it they go up to 12,000 euros. Finding tenants should be no problem. Mortgages are pegged to euro-rates.

Alternatively, look eastwards, says Daireaux, around the Places de la Republique and de la Bastille, both popular with the fashion set, who will provide tenantry. The district is `tres Bobo — bourgeois-boheme' — people around 30 to 40, 'easy-going and moneyed, with champagne-socialistic tendencies'. Another draw is the Canal St Martin: 'Prices are relatively low when compared with the better-known parts of the capital.' The better properties overlooking the water should be negotiable at 4,500-5.500 euros. Weill recommends similarly the 9th and the 15th as good areas for buy-to-let, at 4,800-5,800 euros.

Also worth investigating is the financial institutions market. Many banks and insurance companies are now selling their portfolios. If there is a sitting tenant, expect a 20 per cent discount to market value — and immediate rent. Then when the lease expires the landlord can either renew it for more, sell the apartment for a gain or move in himself. Daireaux cites a belle époque apartment in the 16th worth at least a million euros unoccupied, but for sale at 850,000 euros. The tenant now pays 36,221 euros a year plus service charges until the lease ends in 2007. The buyer should add on 7 per cent for taxes etc, making a total investment of 910,000 euros. But in 2007 he should be able to raise the rent (which even now should be nearer 48,000 euros a year) or sell the place for, perhaps, a 20 per cent gain.

But these properties rarely come to the open market. The way to find them is to retain an agent like Hawkes (00331 42 68 11 11) or Weill (who is solely a buying agent, 00331 40 45 06 88) or David King in London (020 8673 6800) to act and search on your behalf.