The election of a new president and new government in France have put the country back on the map for investors, delegates heard at PropertyEU's European Outlook H2 2017 Investment Briefing, which was held recently in Paris at the offices of law firm Taylor Wessing.
The ‘Macron effect’ is already visible, as the new president’s dynamism is leading to a surge in confidence that planned reforms will be implemented and the economy will strengthen.
‘What has changed is that people are optimistic and France has become sexy again,’ said Benjamin Cartier-Bresson, head of the representative office for France at German lender Berlin Hyp. ‘France is seen as having a bright future again.’
That potential may or may not be realised, depending on whether reforms that have been talked about for decades will actually happen or ‘whether French fatalité will win the day, but for now we are allowed to be optimistic,’ he said.
‘The major impact of Macron is that there is more enthusiasm for investing in France from domestic as well as foreign investors,’ said Alfred Fink, partner at Taylor Wessing. ‘Sentiment is positive and we are seeing a lot of North American money coming into France, as well as Middle Eastern capital, which with Trump is now less likely to be invested in the US.’
Win-win situation
France is benefiting from a win-win situation, the briefing heard, as it benefits not only from positive changes at home like the election of Macron and a strengthening economy, but also from negative factors elsewhere, like the uncertainty over Brexit in the UK or the issues with the Trump presidency in the US.
‘France is a winner of the current situation, as with scepticism about the UK and too much competition in the German market there are fewer alternatives for investors,’ said Tania Bontemps, president of Union Investment Real Estate France. ‘Two years ago no one wanted to hear about France, it was France-bashing all the way, but now suddenly a new wave of investment is coming and France has moved up into the top three investment destinations in Europe.’
Yet two years ago the French market was just as interesting, she added, as vacancy rates were low, rents were going up and yields were higher than they are now, but for political reasons it was not attractive enough. 'The fundamentals were good then, but it did not register with investors. What has changed now is the sentiment,’ she said.
The ‘Macron effect’ is not just based on hope and sentiment, but on the realistic expectation that reforms will be implemented, in particular to make the labour market more flexible. ‘Labour law will be a serious test for Macron,’ said Cartier-Bresson. ‘Now tenants have the upper hand but if that changes, it could transform prospects for the office sector in France.’
Proposed changes will affect other real estate sectors too. ‘Macron is changing the legal framework for both residential and commercial leases, making them more flexible,’ said Fink. ‘He has also said he will take a look at transaction taxes where there is a transfer of ownership.’
