With rising interest rates, solid returns in 2023, and a very promising start to 2024, the sky is clearing for savers. A flexible tool with preferential taxation, life insurance is once again becoming attractive and the safest of banking investments. However, in a context of high inflation, diversification remains the wisest course. Identify your needs, identify the different products available, negotiate your contract, go through a management company, monitor costs, generate long-term performance: L’Express guides you.
Rebelote! In March, two heavyweights in real estate fund management – BNP Paribas Real Estate and Amundi Immobilier – once again announced a reduction in the price of shares in some of their SCPIs (real estate investment companies). The reason for this devaluation? Interest rates remain at high levels, which weighs on real estate values, which adjust downward to, mechanically, increase the rate of return on these assets.
A market collapse
In 2023, because they anticipated this price reduction, institutional investors (insurers, pension funds, etc.) got rid of their real estate investments en masse before the market plummeted. “As directly owned buildings take longer to sell than real estate, they sold these products as a priority,” explains Sonia Fendler, president of Altixia Reim.
A vicious circle was thus set up. This selling movement particularly affected SCIs (real estate companies), which invested both directly in physical properties, but also in SCPI shares and listed real estate securities, to have greater liquidity. As they suffered a significant outflow, they were forced – in turn – to sell certain assets to reimburse their unit holders. Until they found themselves selling their SCPIs.
The crisis then worsened in the world of stone and paper and the managers of these investments had to find capital to cope with these waves of redemption requests. Usually, they can count on new subscriptions to reimburse those leaving. But from the third quarter of 2023, this source began to dry up. As a result, some were forced to sell buildings they held in their portfolio. However, “those who find a buyer quickly are often the most profitable, the best placed and therefore those who are worth the most”, underlines a wealth management advisor. Consequence of all these phenomena: when the overall real estate assets of these SCPIs were reevaluated in mid-2022 then at the end of 2023, discounts were materialized.
No stone-paper fund offers a capital guarantee
In turn, individuals holding these products were affected, including those who had relied on stone and paper to boost the performance of their life insurance. In fact, almost all of the SCPIs whose share values fell were eligible for this envelope. It was a big surprise for all those who had opted for real estate as an alternative to euro funds. However, let us remember that in a life insurance contract, no stone-paper fund offers a guarantee on the capital.
Despite these price reductions, which – for the moment – only affect a little less than a quarter of the yield SCPIs marketed in France, these investments retain attractive remuneration. Indeed, last year, according to the Association of Real Estate Investment Companies, they reported – all categories combined – 4.52% on average (compared to 4.53% in 2022).
The fact remains that savers who have recently purchased shares and intend to sell them soon risk serious disappointments, because they will lose money. The impact is not negligible since the declines ranged from -6 to -17%. “If they invested in this product in the short term, they were poorly advised, because SCPIs remain a long-term investment intended to ensure regular income, not to collect rapid capital gains,” recalls Olivier Sénéchal, advisor. in asset management at OSL Conseil in Caen.
Individuals who have saved in SCPI with a long investment horizon should not let this investment lie dormant in their contract. Because now that the worst of the crisis is behind them, it is a good time to arbitrage an old portfolio or… to reinvest in promising vehicles. Indeed, some will resist the current complicated situation better than others. Some could even take advantage of the general market decline to invest cheaply and secure high future returns. In addition, even if slight discounts are still recorded this year on some SCPIs, “In the long term, their shares will increase in value and each year, they will continue to distribute regular income,” assures Nicolas Van Den Hende, director of savings at Sofidy.
Invest with caution
If you plan to buy shares in 2024, do so with caution, as a few ups and downs could still disrupt the tertiary real estate market (offices, shops, warehouses, etc.). As such, it is better to avoid, for the moment, SCPIs whose assets are heavily invested in offices, because their use is called into question by the rise of teleworking. Particularly those located in the inner suburbs of Paris, purchased en masse, off plan, when the economic situation remained euphoric and which are struggling to find tenants now that they have all been built. In 2023, this type of SCPI also posted, for the second consecutive year, the lowest return on the market in all categories, at 4.1%. Conversely, the economic downturn was less marked for SCPIs specializing in hotels and tourism, and businesses; they maintained a constant yield, at 5.1% and 4.6% respectively. Finally, health and education provide more security to the portfolio, with a 4.5% rate of return; while logistics, which benefits from the euphoria of more and more investors, returned 5.9% last year. Finally, there are “diversified” SCPIs, whose managers invest in several types of property. A winning bet last year, since this category distributed a 5.5% return.
More than the sector or the type of assets, if you plan to acquire SCPI shares in 2024 or 2025, carefully examine the management strategy of those you are targeting. If you adopt an opportunistic approach, by selecting SCPIs whose share prices have fallen, carry out this project gradually and favor those whose assets are diversified in various sectors and geographical areas. “This strategy makes it possible to reduce the overall risk level of a portfolio,” says Stéphanie Galiègue, deputy general director in charge of research and studies at the Institute of Real Estate and Land Savings.
For the same reasons, opt for SCPIs which hold assets valued at less than 15 million euros rather than large, very expensive properties. Because “under this ceiling, buyers remain more numerous, which allows the SCPI to have more liquid assets and therefore to suffer less from significant discounts,” explains Sonia Fendler.
Finally, avoid SCPIs which are still experiencing waves of outflows and only invest in those which still attract savings. Because they are the ones who will be able to take advantage of market opportunities by purchasing, cheaper, profitable assets sold by others. With this strategy, you will guarantee yourself an attractive and above all sustainable return. Please note, if you invest via your life insurance contract, be aware that you will not be able to subscribe to all the products on the market, since only those listed by your insurer are accessible.
An article from the special “Placements” section of L’Express, published in the weekly on April 11.
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