French Real Estate
Foreigners love Paris…
That’s why Paris Real Estate just broke a new historical record.
If there is a real estate depression in United States, but also in European countries like Greece, Spain and Ireland, French real estate market is still trading at high price, for several reasons:
- Building new constructions in France is not easy, it requires a lot of administrative approvals, and for example in Paris you cannot just build high buildings without urban services approval.
- French banks have always been cautious in lending money for buying real estate. Most of buyers had to have a debt income ratio below 33%.
- French law is very protective for buyers, French and Foreigners have the same rights, thats why foreign people like investing in France, where life quality is still great.
Housing Market Overvalued
But with 3-4% yields, from which you have to deduct many costs and taxes, it appears to me that French Housing Real Estate is overvalued now, and that it might start to decline.
Paris is at historical new highs, and price have increased much more quickly than rents.
A decline would be logical, even though with financial crisis, real estate is considered as a safe protection.
Professional Real Estate Market
But if an investor doesn’t want to take the risk to invest in an over valued market, he should consider investing in French professional real estate, which offers much better yields.
Scpi for example, offer a net yield
Scpi are private companies that invest in professional real estate, and rent it.
- They collect the rents, and pay it back to their investors.
- The management company takes care of everything:
- buying, selling, renovating, finding tenants, etc…
- Investors buy shares, and receive a net yield every quarter.
The best scpi these year will offer a 6% net yield, with a good yield-security ratio:
- scpi possess tangible assets
- they don’t have debt or very little
- their assets produce cash-flows
- management costs are a fixed percentage that cannot be changed
Foreign people are allowed to invest in Scpi, even if they don’t reside in France.
They will only have to make an annual tax declaration, but if their income in France is less than 11 896 euros per year, they won’t pay any taxes.
They’ll have to pay csg-crds though, which represents 15,5% of the income.
The advantages are:
- they won’t have to manage anything, everything is done by the management company
- they can decide how much they want to invest. If one share of scpi costs 1000 euros, they can decide how many shares they want to invest in.
- yield is great
- it’s a good way to diversify your assets and currency
The risks and drawbacks are:
- it’s real estate, so the value depends on real estate value
- income is transferred only on a french bank account
- an annual tax declaration is necessary
As a French financial advisor, I have a few foreign investors who invested in Scpi and are happy with it.