Paris : the right time to invest !
For the third year, EY and JLL have published “Why invest in Paris?”, their reference guide for foreign investors looking to move into the French real estate market.
“The Paris real estate market offers solid fundamentals to investors which allow them to plan long-term acquisitions: transparency, maturity, liquidity. It’s worth remembering that, with 53 million sq m, the Greater Paris Region has the largest real estate stock in Europe and the third largest in the world after Tokyo and New York. Rental activity is very strong with levels of take-up running at twice those seen in London. In terms of investment volumes, Paris is also highly active and has been up on the top step of the podium of continental European cities for several years posting €18 billion in investments in 2014 and 2015” explains Stephan von Barczy, Director of JLL’s investment department.
Major investment planned as part of the Grand Paris project will create new investment opportunities. The city already has a highly dense transport infrastructure (in second place behind Singapore and way ahead of London) which is to be further strengthened by Grand Paris.
Paris and the wider region attract corporates! Looking at the Global Fortune 500 ranking, the Greater Paris Region has more major corporates than Germany or the United Kingdom. In fact, over 31 companies listed in the ranking are French and 29 of them have specifically selected the Paris region as the location for their headquarters.
In addition to these fundamentals, two further elements make 2016 an ideal year to invest in Paris:
– A high potential for value creation. Rents in the Greater Paris Region are in fact low in the cycle whereas they have already started to increase in London. Comparable prime yields across these 2 markets make Paris look like a better proposition this year with a higher degree of potential to add value;
– Real estate risk premium more attractive than in London. The prime yield stands at 3.5% in both of these 2 markets, against a risk-free rate (OAT) of 0.5% in France compared with the London equivalent approaching 1.5%.
From a legal perspective, France has seen changes in line with most European countries and those of the OECD. Despite the limited nature of the changes to finance laws at the end of the year, there were implications for the tax environment for players in the real estate sector. Transaction costs for real estate sales in the Greater Paris Region were increased. Internationally, there was a tightening of the controls used by French tax and legal authorities regarding the terms under which non-residents can benefit from the incentives laid out in tax treaties signed by France. Various measures suggested by the OECD as part of the BEPS project have further emphasised the need for investors to ensure that they make the necessary arrangements. Despite these changes, France still has an attractive framework for real estate investment with favourable rules on debt financing and sustainable exemption schemes for real estate investment structures that are listed or regulated by the AMF.
“We are delighted to announce the publication of the third edition of our 2016 guide “Why invest in Paris?”, a reference guide developed for investors who are new to the Paris market. This document describes the current situation in the Paris real estate market and analyses in detail the legal and tax implication of real estate investment in France. Grand Paris is a highly ambitious project for the real estate sector. Infrastructure development will drive activity in Paris as a hub and this project demonstrates that the Paris market still has a genuine future for international investors”. Adds Jean-Roch Varon, Partner at EY and head of the real estate sector for France.