FRENCH REAL ESTATE PROPERTIES: INVESTMENT OPPORTUNITIES

Euro Europe's single currency was officially launched on January 1, 1999 in 11 countries in the European Union.

On January 1, 2002, Euro notes and coins were introduced into circulation in 12 countries - the original 11 had been joined by Greece.
All national notes and coins ceased to be legal tender by February 28, 2002 although banks will continue to accept them until at least 2004.

The group is nicknamed Euroland or the Eurozone but it is not a new country nor yet is it merely a "currency zone". Given the size and strength of the economies involved, and the fact that the population of this zone is around 290 million people, the Euro may well become a second global currency and, some analysts say, may even eventually take over from the dollar as the most important world currency.

Britain played no part in the Euro’s launch but has retained the Pound Sterling while considering its options. Denmark voted against joining and Sweden is also biding its time.

Eurozone forecasts show a GDP growth of  0.8%, 1.5% and 2.5% for 2002, 2003 and 2004 respectively, while Consumption will increment by 0.6%, 1.4% and 2.6% for 2002, 2003 and 2004 respectively. Inflation will be in the receding side, swinging between 3% and 2% between 2002 and 2004.

With such a positive outlook (positive for real estate market), the Eurozone remains an important area to be considered for investment purposes. ( In fact, outlooks for world economy does not look positive at all, thus the main engines are at low gear (U.S, Japan and Europe) so there is nothing positive about it when macro-economics is concerned.)

Now, the question arises as to why France in particular.

The answer is quite simple: France is the second biggest economy in the Eurozone.

Geographically speaking, France,  the second largest economy in the Eurozone is located in the center of Europe making it easily accessible for the more than 290 million potential consumers who make up the Eurozone population. France is the most visited country in the world, taking tourism very seriously. With a strong tourism industry there is always a high demand for accommodation boosting the chances of those benefiting from rental income.

Real GDP forecasted for France shows a growth  in the order of 0.9%, 1.4% and 2.4% for 2002,2003 and 2004 respectively.

Interest rates are most likely to remain low, and although the ECB did not follow suit (as it usually does) to Greenspan’s recent interest cut, it is widely agreed by analyst that the pressure of a stagnant world economy and the very real threat of recession is putting in even greater pressure on interest rates to dive even further with the hope that low interest rates will boost consumer spending.

Plunging interest rates make home mortgages more attractive (cheaper) and affordable to a greater number of people. Fact that will eventually create a pressure on the demand side of the price-curve as opposed to the more inelastic and fairly stable supply force of real estate property, boosting the tendency for an increment in capital growth (property price inflation).

To set out some practical examples, let us focus briefly on House Price Inflation and Rent Price Inflation in the region of Paris, more specifically in La Defense region.

La Defense region is one of Europe’s commercial poles. With over 2.5 million square meters of office space, it serves as a vital platform not only for the French economy, but for Europe and the World as well.

Located just 5 minutes away from Champs-Elysees it also enjoys an exceptional net of public transport facilities and an impressive array of hotels, restaurants and other amenities.

14 of the 20 leading French companies and 15 of the top 50 companies worldwide are located in La Defense.

House Price Inflation for apartments have increased an average of  between 6% to 7% during the last twelve months in La Defense region, while Rent Price Inflation increased between 3% to 4% over the same period.

Expected Yield, net of all expenses (property management, services and maintenance, taxes, and mortgage interest ) is around  6%.

As to sources of funds, real estate investment provides a good leverage, thus most French banks can financed between 75% to 95% of purchase price.

The safest investment, and no hassle; we are talking about real estate properties, in France of course…

Joe Weberhofer

Real Estate Broker

Prime International Properties