At Mipim, investors courted to reinvest in housing

With conferences on affordable housing and demographics, the presence of numerous mayors, and a "reinvestment" summit, "housing" is on everyone's lips at the Mipim (international market for real estate professionals) trade fair, which demonstrates a desire to bring the public and private sectors closer together.

Like other representatives of major cities who came to woo the big money men present, London Mayor Sadiq Khan called for "more investment in my city, please" during a speech Monday to an audience of real estate professionals.

Institutional investors, such as insurance companies, asset managers, and pension funds, "can help bridge this gap, for example in the event of problems at domestic developers, and provide housing stock," says Tom Leahy, director of European real asset research at financial services firm MSCI. In France, public-sector companies CDC Habitat and Action Logement have been massively buying homes from developers in need of clients in 2024.

"The problem right now is that the real estate sector as a whole is lacking new capital inflows" due to the rise in interest rates that has shaken the market, he added, interviewed by AFP.

Corporate-managed real estate and infrastructure assets were worth more than $13.000 trillion globally in 2023, according to MSCI, with 22% of that being residential.

In France, institutional investors have been moving away from housing over the years since 1980, moving towards more profitable markets: offices, hotels or even non-real estate investments, such as shares on the stock market.

Today, Tom Leahy reports that "if you look at where investors want to deploy capital, residential is still very high up there (…) because of structural trends: housing shortages, rent growth in many major European cities, urbanization, population growth."

Conversely, the development of teleworking has put a stop to the development of offices and caused the price of certain spaces to fall.

"Factory of speculation"

The share of residential investments has increased significantly in recent years in several European countries according to MSCI, notably the United Kingdom and Spain, with the exception of Germany where a large part of the private rental stock is already managed by companies.

"The two most dynamic markets in Europe are the United Kingdom and Spain because they are deregulated markets, with rising rents" and a return on investment "above 5%," points out Stéphane Theuriau, president of BC Partners Real Estate, an investor specializing in real estate.

Rents rose by an average of 9% in the UK in 2024 and by 11% in Spain, prompting the Spanish government to announce measures to try to contain rising prices and boost construction.

In France, profitability is "not attractive enough" to attract financial companies to the rental market, according to Florence Semelin, head of residential at real estate consultancy JLL, mainly due to rent controls in most high-demand areas, where there is the greatest shortage of housing.

The impact of financiers on tenants is indeed mixed: long-term investors "help professionalize the residential rental market" because their goal is to "get people to stay as long as possible," but investors seeking high profits can also "put significant pressure on rents," reports Tom Leahy.

On Tuesday and Wednesday, associations demonstrated in front of Mipim, a trade fair that Jean-Baptiste Eyraud, spokesperson for Droit au logement, describes as "a factory of speculation, expensive housing, and the housing crisis."

As for the construction of new housing in France, in 2023, it was financed 83% by households and less than 12% of investments came from businesses, excluding social landlords.

"It's a challenge to bring back institutional investors, but that won't be enough to get the construction industry going again," warns the FFB.