Regulatory issues remain a serious challenge for investors in France and are prompting some property owners to become vendors, according to Alfred Fink, partner at Taylor Wessing.

Regulatory issues remain a serious challenge for investors in France and are prompting some property owners to become vendors, according to Alfred Fink, partner at Taylor Wessing.

‘Investors in France need to take the new taxation convention into account. In fact, that’s why a number of investors are selling in France, they are getting rid of their holding companies and selling them to US companies.’

Fink made the comment at a PropertyEU Outlook Investment Briefing held at the Paris office of Taylor Wessing on Thursday. On the regulatory side, double tax remains an issue in France as do tax charges by landlords to tenants, he noted. ‘These issues are not always fully recognised by foreign investors.’

Black box
The layers of regulation that have been added in France in recent years in the area of taxation and in the pensions fund and banking sectors are creating something of a black box, according to Marcus Cieleback, head of research at Patrizia Immobilien. ‘The question is how will all these regulations work in the long run? Nobody is doing a stress test, but possibly there has been too much regulation. There may be attempts to fine tune things, but that’s difficult to do as long as it’s not clear yet how it all works and how things affect each other.’

Any backtracking on regulation will have a major impact on markets going forward, Cieleback said. ‘There’s a big risk that the markets cannot develop as they should. The money is out there but it’s possible that it won’t be deployed as it could or should be.’

Despite the challenges posed by national regulations, French investors are becoming more international, Fink noted. ‘The mind set is changing, the investor community is becoming more international and we see players accompany their investors to the UK and Germany. In fact, a growing number of French institutional investors are setting up OPCI vehicles in other countries,’ he noted.

Crowded market remains a challenge
Turning to the topic of political risk, La Pierre pointed out that this is always a factor preying on the back of investors’ minds. ‘It doesn’t play a role in day-to-day strategies, only in the long term. In general, investors need to decide on the amount of capital they want to dedicate to the market. Allocating market wisely in a market that is extremely crowded is much more of a challenge.’

At the same time, a Grexit or any other political upset would definitely affect sentiment, he conceded. ‘We are also sellers. We hope to have some deals done before the summer. I hope a Grexit doesn’t take place as that would pose a big challenge and a need to transfer some money. I think the EU would be able bear it, but there would be a reaction, even if only short term, before the market feels comfortable again. These are sensitive times. I don’t want to be in the middle of a deal when something like that happens.’