Real Estate: Investors Are Still MIA… But Not for Long
Since this summer, the real estate market has seen a notable recovery, largely due to lower interest rates and more lenient lending conditions from banks.
Although first-time and second-time homebuyers are back on the market, investors remain on the sidelines. Against this backdrop, *L'Adresse* conducted a survey with Opinion Way to assess French people’s investment intentions, their motivations, the factors holding them back, and the government measures that could encourage them to invest.
A Market Recovery and a Return of Buyers, but Investors Still on the Sidelines
Since the summer, agencies in the l’Adresse network have observed amarket recovery, marked by an increase in sales volume (+5% in the third quarter of 2024 compared to Q3 2023) and in the inventory of properties for sale (+10% in the third quarter of 2024). This recovery is mainly due to the return of second-time homebuyers. First-time homebuyers, benefiting from lower interest rates, are also back. However, investors remain absent.
One in five French people plans to buy a home within the next two years, with one-third intending to purchase a rental property
According to an OpinionWay poll conducted for L’Adresse on October 23 and 24, 2024, among a representative sample of 1,009 people, 20% of French people say they intend to buy a home within the next two years. This proportion rises to 37% among those under 35, or nearly 4 out of 10 young people.
Among those planning to buy within the next two years, two-thirds want to purchase a primary or secondary residence, and one-third want to buy a rental property. “Although investors are currently absent from the market, the French have not lost interest in rental investments. While only 20% of the French have short-term real estate plans, one-third of them want to buy a property to rent out. However, certain obstacles remain that are preventing them from taking the plunge,” says Brice Cardi, president of L’Adresse.
Motivations for Rental Investment: Income, Wealth, and Security
The main motivations for making a rental investment are to have an investment that generates monthly income (27% of responses), to build wealth to pass on (20%), and to invest in a safe asset (19%). Realizing a potential capital gain, purchasing a property to live in later, or taking advantage of tax-exemption programs were less frequently cited reasons (12%). It should be noted, however, that tax exemptions are a motivation for 23% of homeowners who are already landlords—twice the average for the French population.
Barriers and Fears That Prevent People From Taking the Plunge
The main barriers to rental property investment are high real estate purchase prices (42% of responses), which hinder access to homeownership and affect the investment’s profitability. Next are the risks of unpaid rent or squatting (39%), a major obstacle that partly explains the 3 million vacant housing units in France. The increase in property taxes in many municipalities is also a significant barrier (33%), acting as a greater deterrent than the cost of energy-efficiency renovations (26%) or excessively high interest rates (25%). The risk of being unable to rent out a property (11%) or rent control (10%) are cited less frequently.
The barriers identified vary depending on the age of the respondents. Older French people are more concerned about rising property taxes (37% of responses among those aged 50 and older, compared with 26% among those under 35) and the cost of energy-efficiency renovations (29% among those over 50 vs. 21% among those under 35). Conversely, those under 35 place greater emphasis on interest rates they consider too high (31% among those under 35 vs. 20% among those 50 and older) and difficulties in obtaining a mortgage (30% vs. 18%).
Expectations for government measures to promote rental investment
L'Adresse also surveyed the French public on government actions that could promote rental investment. To provide greater incentives to invest in real estate, the French primarily expect the government to implement measures to protect landlords from unpaid rent (55% of responses), as well as a reduction in property taxes (39% of responses)—expectations that align with their concerns and barriers to investment.
In addition to a reduction in property taxes, 30% of French people would also welcome a reduction in the tax burden on investors, particularly on rental income. Furthermore, 29% of them cite more flexible mortgage lending criteria as a measure that would expand access to homeownership amid tighter lending standards resulting from the recommendations of the High Council for Financial Stability.
In contrast, relaxing rent controls (15%) or the requirements related to the Energy Performance Certificate (17%) are mentioned less frequently. Finally, only 19% of French people want tax-exemption programs such as the Pinel scheme to continue in order to encourage rental investment.
Landlords do not expect more than the average homeowner in terms of protective measures for them regarding issues of unpaid rent or squatting (57%, compared to 59% among all homeowners). However, they place greater emphasis on reductions in property taxes (47% among landlords vs. 39% among all homeowners) and taxes on rental income (50% vs. 33%) as well as the relaxation of legal restrictions on the least energy-efficient housing (25% vs. 20%) and rent control (21% vs. 16%).
