Foreign direct investments into French real estate

Abstract: The purpose of this thesis is to draw the global trend of Foreign Direct Investments (FDI) in the French real estate market since 2008 and to understand foreign investors’ behavior and the incentives which urge them to invest in French property market. This study relies on the numerous yearly reports released by consulting and real estate companies and gives an overview of FDI since 2008. From a legal point of view, the French property market is extremely organized. Acquiring, holding and selling real estate property is allowed for international investors. There is no restriction on international and no authorization is needed. Foreigners can freely invest but may have to declare their operations to the French authorities in charge of foreign investments legislation. Both these simple requirements and its attractiveness make French real estate an appealing market for foreign investors which represent between 40% and 60% from year to year. In five years, global economic context has changed and new actors have appeared on the international stage. With more than €25 bn real estate investments in 2007, total transactions plummeted to €8 bn in 2009 and then have stabilized at around €15 bn in since 2011. While developed countries attempt to solve their financial and economic issues, emerging country investors from Middle East and Asia have the opportunity to get into the French market and develop their investments. New foreign investors focus on either Parisian offices or trophy assets, in order to foster their exposure, whereas traditional investors from developed countries - such as Germany, the UK, the USA, etc - usually more risk averse, look for secured and core assets in Paris or its suburbs which guarantee few risks and regular returns. The financial crisis of 2008 and the European crisis of 2010 stopped the financialization of real estate assets which resulted to irrational prices in French and more precisely Parisian market. Investors have come back to initial use of real estate assets which is now considered as safe haven investments.