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Unprecedented rental investment boom in the Paris area
In two years, rental investments have jumped 69% in Ile-de-France, according to Century 21. Investors are flocking to Paris.
Rental investments in Ile-de-France are increasing at unprecedented levels. “We’ve never seen anything like it,” says Laurent Vimont, president of Century 21. According to the real estate network, more than one out of every four real estate acquisitions in France is a rental investment. And Ile-de-France, despite prices that continue to rise, is not to be outdone: rental investments represented, in 2019, more than one in five acquisitions. “In two years, they’ve increased by 69% in the region, 45% in Paris,” continues Vimont, adding that, as far as investments are concerned, “real estate is becoming the undisputed gold standard.”
The numbers don’t lie. In 2009, rental investments represented only 10% of purchases made in Ile-de-France. Today, this number has doubled. The increase has been most significant in recent years jumping from 13.1% in 2017 to 17% in 2018 and finally to 22.2% in 2019. Outside of Paris, the highest concentration of rental investments can be found in Seine-et-Marne and Essonne where they account for more than one in four property purchases.
In Paris, where, in theory, buying to rent makes less sense with ever-increasing prices and rent caps, investors nevertheless continue to flock. According to Century 21, these investments account for 31% of purchases (+8.8% in 2019). Vimont sees a very simple explanation for this: “Rental profitability is losing its importance: the aim is to invest in order to build up assets.”
“We don’t buy in Paris for the profitability,” confirms Maël Bernier, from Meilleur Taux. “We buy because we think of our children who may be able to live there during their studies, or when they’re older… We know it’s an asset that will lose little to no value.”
“It’s more of an investment for inheritance purposes,” confirms Bassel Abedi, head of Rendement locatif. Many Parisians also buy outside of Paris, or in the suburbs, and remain tenants in the city. For the luckiest, or for those who have a good handle on the market, any rent collected from their second property can be used to pay rent on their main residence.
The “icing on the cake” for some, tax exemption measures (Malraux, Pinel, Denormandie) are no stranger to this “boom”. “When people come to see me, it’s first and foremost to lower taxes,” explains Bertrand de Raymond, head of the Capcime. “Investors assume that real estate could be their way to tax exemption, then only afterwards are they interested in the property, its location, etc.”
Banks love investors
But beware, warns Loïc Guinchard, commercial director of Build Invest: “On paper, tax exemptions seem very nice, but you have to narrow down your search to areas where rental demand exists. Because in order to be tax exempt, you have to rent!”
And what about the banks? In addition to low interest rates, financial institutions are more gentle with investors than with those buying a main residence. “With the right project, in the right location, an investor is sure to be approved for a loan,” says Bernier. This leaves many French people inspired, wanting to invest today to reap tomorrow’s rewards.
Bernier adds: “Investors buying to rent capitalize on one thing: their retirement. With the fear of not earning much at the end of their career, they see this as a worthwhile opportunity for additional income.”