DevDosh Ltd covered UK property investment schemes are enjoying a very health period right now with huge interest in alternative property investments like GP surgeries, build-to-rent, student accommodation and residential developments.
It seems that our neighbors across the English channel over in France are also seeing extremely high levels of interest when it comes to property investment, this has some people concerned that this could encourage a property bubble in European real estate markets.
Open-ended property funds (Les Societes Civile de Placement Immobiliers (SCPIs), invest in property across Europe and are currently showing very attractive yields to French retail investors.
During the period between 2013 and 2016 the capital invested into these funds more than doubled, a total of 5.6Bn Euro’s was invested last year alone, this is a considerable increase on the historical average which stands at around 1 Billion Euro’s.
Adrian Benedict, investment director of real estate at Fidelity International, said the large inflows of capital were driving European prime real-estate values into “bubble territory”.
He added: “Small investors who are hungry for yield are piling into property funds, displacing large international investors, pushing up prices and depressing yields to unsustainable levels that no longer compensate for the capital risk involved.”
The fear is that France could come unstuck just like UK property investment funds did last year after Brexit, with many ceasing traded due to cash flow problems when investors withdrew their money.
DevDosh Ltd believes that there has been lessons learnt by the UK property funds and the liquidity dangers of an open-ended fund and France would also do well to heed these lessons, the retail investors needs to make sure they completely understand the risks involved with open-ended property investments.
“[The size of the funds] have grown exponentially,” said Mr. Benedict, “but it’s an investor base that is relatively new.”
He added: “If you’re coming into the asset class, and not realising the issues — it could make for a very unpleasant ending if the market corrects abruptly.”
Fund managers in charge of running these SCPI funds have stated these concerns are unfounded as all investors were implicitly told that they may have to want a few months to receive their money.
Investors have been told although that the investment fund is open-ended this does not mean there is daily liquidity, investors can ask any day they like for the money back it does not mean you will get it in one day according to Marc Bertrand, chairman of La Française Real Estate Management.
It has also been mentioned to investors that if cash flow does become a problem they will have to wait until the fund manager can secure proper market value for the property involved.
One fund manager has gone as far as saying that he would just tell investors to wait even it took three years to sell the property.
So if any of my French neighbors happen be reading this let say you are investing in a close ended property as far as I am concerned, and if that is the case visit DevDosh Ltd to see how our close ended UK property fund can show you 10% per annum, which is the full tern of the investment by the way, so go on give us a call today.