Investment in France set to drop by 30% in 2012: JLL

French real estate investment volumes are expected to decline by 20-30% this year due to the end of tax breaks for vendors to SCPI and OPCI investment vehicles, according to property adviser Jones Lang LaSalle.

'Last year the market was driven by the abolition per year-end of a tax advantage which favoured local players at the expense of foreign investors,' Stephan von Barczy, head of Capital Markets France at JLL told PropertyEU. 'This is why we expect to see a quieter market this year.'

Von Barczy is forecasting investment volumes of around EUR 8 bn in the Paris region in 2012, compared to as much as EUR 11.3 bn in 2011.

According to Von Barczy, international investors will play a bigger role in the French investment market this year, largely as a result of the tax change and investors' search for diversification across Europe. 'Several foreign investors are now looking at the market because they are no longer 'handicapped' by a fiscal regime which required them in some cases to overbid local players by 10%,' he noted.

Up to the end of 2011, French bidders were in fact be preferred to their international counterparts as the vendor would pay lower capital gains tax in the event of a sale to a local SCPI or OPCI fund.

So far this year, sovereign wealth fund money is the biggest source of capital in the market, with the largest deals being made by two unnamed sovereign wealth funds. An Asian investor, advised by JP Morgan Asset Management, is believed to be the buyer of Eurosic's 52 Hoche and Avant Seine for EUR 508 mln, while Invesco Real Estate is understood to be advising a Middle Eastern SWF on the purchase of two trophy assets in Paris, Cité du Retiro and Neo, from KanAm Grundinvest Funds.