Will Real Estate Always Be A Good Investment?

The banking/financial system raises all kinds of worries with zero rates, which are a sort of cancer of money, central banks that do not know how to raise interest rates, banks with terrible balance sheets that are levered to the hilt, coercive and menacing laws (BRRD, Sapin 2, freezing of accounts, as we’ve mentioned the last time). And little by little, one phrase emerges: Get Out of the Banking System!

Getting one’s money out of the bank – at least a large portion of it – is one thing, but what is one to do with it? The preferred investment, the most reassuring, according to observations and some polls, is real estate. It is true that real estate’s performance, especially in France, has been great with a steady progression in prices, which should reassure potential investors.

That being said, one thinking of investing today in the real estate market should ask oneself some questions, instead of just following the recent trends without thinking. It is a long term investment – one must look far ahead, and several risks are to be taken into account.

First of all, there is the risk of a bubble, notably due to today’s extremely low interest rates that provide artificial fuel to the market. If rates were to rise, prices could crash seriously.

The fiscal risk is also important: Household owners are the easiest to “fleece”, being part of the middle class, already heavily taxed in France, whilst the actual owner, a “rich man”, must pay as well. There is no end to fiscal imagination, by the way, and the stupid idea of a “fictional rent” is taking ground, discreetly, waiting for some government to implement it – the rent an owner doesn’t pay would be considered as “revenue” that should be taxed. This is quite scandalous, but little bureaucratic hands are diligently working on it. As a matter of fact, a think tank linked to Matignon, France-Stratégie, has spun this idea in 2016…