A property market bubble?

The uncertainty surrounding the international stock market (French included) is leading more French households towards property investment. With UK property investors being put off by a deflating home market, following Les Français is now distinguishing itself as the most attractive prospect.

Despite all the recent headlines about a certain broker, France is not a country of gamblers, far from it, so no wonder that French households prefer property to shares investment: the French concept of investment is all about security, traditional and predictable assets that will appreciate and be passed on to the next generation. According to the latest study from French newspaper Le Figaro, last month’s black Monday is very likely to push even more French households towards property, either now or once the stock market has stabilised. Least affected share holders are set to liquidate their portfolio and re-invest in bricks and mortar instead – as has already been the case last year following the ‘Dotcom’ crash.

‘So, where are the best buys? As VEF predicted last year, the market is getting more and more refined and at a time where security prevails, the preferred locations are city centres, business parks and the niche luxury property market, which are a safer bet than rural areas and small towns - these logically see less demand from the home market, due to their more volatile appreciation, rental and resale potential.

Rental returns for Buy-to-Lets is likely to settle at around 4 to 4.5% p.a. at best this year (which remains attractive) and this percentage could decrease further the more you wait to invest due to the growing gap between property prices (linked to increasing market demands) and rental rates (linked to slow household wages’ increase). This is good news for the established leaseback market which continues to offer attractive guaranteed yields above 5.5% p.a. but beware of over-promising promoters who could lure investors with unrealistic yields which will have to be lowered eventually: attractive location, amenities, targeted clientele and access to the property are good give-aways of a realistic high-yield leaseback property.

The predicted rise in French property investment and reported market appreciation are good news for British and Irish investors and following in French investors’ footsteps would definitely be a wise move which is set to pay off in the long run; the prospect of safety offered by realistically priced property with strong home demands will ensure good yields, resale potential and eventually return on investment.

So, in essence, there is no need to gamble to increase your profits: chose the safe route instead and avoid a lot of trouble! If only this could apply to some brokers.

For further information, visit vefuk.com.