Nothing seems to stop the steady rise in French Real Estate prices. The price of new Real Estate has almost doubled in the last 7 years and rents have increased by about 10% annually. This concerns not only Paris, but the whole country, and can be mainly explained by: high and consistent demand; various recent tax incentives created to make purchases by private individuals easier and to strengthen the importance of Real Estate companies. The new French REIT or SIIC (Sociétés d’Investissement Immobilier Cotées) system provides these companies with total tax exemption from their rental income and capital gains, subject to an obligation to distribute dividends and to pay a tax amounting to 16.5% of the unrealized gains. Most listed Real Estate companies have selected this system, and they will be soon the jewels of the Paris stock market.
It must be pointed out that their recent stock market progress was more than positive and that they out-performed the market (+40% for Unibail, +30% for Klepierre) in 2004.
In addition, if we consider the tax decrease applied to the non-SIIC companies’ gains arising from Real Estate assets, the forecast re-negotiation of certain international treaties and the tax consequences of the IAS standards to be applied in France soon, the only possible conclusion is that the Real Estate sector, should continue to offer significant opportunities to foreign investors in the next future.
