Melina Druga highlights five ways explaining how the French election will impact the real estate investment market.
The impact of French election on real estate investment
During the fourth quarter of 2016 real estate investments in France dropped 8%, according to Dubai Chronicle. Political turmoil in other parts of the world, especially Brexit and the election of U.S. president Donald Trump, have negatively effected investments. In April, the French will go to the polls. With multiple candidates running for president, the future is uncertain. Will President François Hollande win reelection or will a more right-wing candidate win voter’s confidence?
How will the French election and other geo-political turmoil impact the real estate investment market? Let’s look at how.
- Prime property purchases increase. The French economy recently was categorized as growing, and prime real estate investments have remained steady. Over the past dozen years, prime property listing views have increased 52% while the number of acquisitions have increased 28%, according to a report by Knight Frank. Over the same time frame, property values decreased as the Euro lost value. This has attracted British and American buyers trying to get more value for their money. These buyers are purchasing investment properties and second homes, although some of these buyers are expatriates. Source: Property Forum
- Crowdfunding suffers a big loss: Crowdfunding in real estate is commonplace in France and for the most part has been successful. However, crowdfunding is not without risk. Real estate developer Terlat had recently used the crowdfunding platforms Anaxago and WiSeed to raise funds for six projects. The company is now going out of business and investors risk losing $2.8 million in investments. So far, only $320,128 has been reimbursed to investors, and it’s unclear whether the remainder ever will be repaid. Source: Crowdfund Insider
- Brexit to benefit French markets: Investors cautious of what Brexit means to the economy are taking their business from the UK to France and Germany according to the European Public Real Estate Association. Paris, especially, is already trying to lure investors with a marketing campaign and by redeveloping office space. In Paris, 50 million square meters of office space is available. The association, however, expects slow market growth in 2017. Source: South China Morning Post
- Cross-border investment was high in 2016: In the final quarter of 2016, cross-border investments reached $100 billion, growing 45% and comprising nearly half of all real estate investment. France was among the nations with the largest outflow of investment funds. Investments reached $11.3 billion, a 65% increase from the $6.8 billion invested the year before. Most French investments were in the U.S. and Western Europe. The largest deals were the German portfolios purchased by Primonial REIM for $1.1 billion and Fonciere des Murs for $915 million.
Source: The Investor
- Buyouts May Be Common: Chinese investment company Fosun Property Holdings has purchased the controlling stake in French investment firm Paris Realty Fund. Fosun owns 50.01% of the firm. As of January, Paris Realty Fund had revenue of $28.89 million, a 22.1% increase.
Source: Fi News Asia and Reuters
Melina Druga is an author and freelance journalist. You can follow her on Twitter @MelinaDruga .