Annual study on real estate investments: "40 years of comparative performance - 1981-2021"

By covering 4 complete decades, marked by four major economic crises (bond and stock market crash of October 1987, bursting of the internet bubble in the early 2000s, subprime crisis in 2008 leading to the global financial crisis, brutal shock to the economy from 2020 with the onset of the health crisis), the IEIF study leads to robust conclusions on the long evolution of the main investments.

This 2022 edition, with the characteristics of investments at the end of 2021, covers the period of economic rebound and measures the major impacts left by the pandemic crisis on the universe of investments in terms of the hierarchy of assets.

Beforehand, the 40 years of performance study takes stock of the characteristics of household assets to understand their expectations in terms of investments but also the evolution of their savings behavior.

A surplus of financial savings still very high in France

According to the Banque de France, the household financial savings surplus, built up over two years (between the first quarter of 2020 and the fourth quarter of 2021) calculated as the difference between the financial savings flows observed and the flows that we would have obtained by extending the pre-Covid trend, is estimated at 175 billion euros, after 113 billion at the end of 2020.

On average over the year, the household savings rate in France stood at 19,5% in 2021 according to INSEE after 21,4% in 2020. The financial savings rate also fell: it is stands at 8,7% in 2021 after 12,2% in 2020.

In 2021, financial savings mainly focused on bank deposits, which increased by more than 104 billion euros: sight deposits and interest-bearing deposits, the outstandings of which amounted to 672 billion euros and 1.161 billion respectively. euros at the end of 2021. Life insurance grew by 39 billion euros and now represents outstandings of 2.178 billion euros.

In line with the performance of 2021, the Stock Exchange continues to attract a growing number of investors: 1,6 million individuals placed a buy or sell order in 2021, including 217.000 new entrants.

Different performance rankings depending on the period

• Over 5 years (2016-2021): the performance of the Industrial premises (covering logistics and business premises) is particularly high, due to the strong appreciation of the market values ​​of Logistics over the period. While Equities present a 5-year IRR of more than 10%, listed real estate is in negative territory, in particular in connection with the stock market behavior of Foncières Commerces.
• Over 10 years (2011-2021): Equities lead the performance ranking with a 10-year IRR of 12,4% ahead of direct real estate: Industrial premises are in second place with a 10-year IRR of 11,4 % followed by Offices (7,8%) and Retail (7,2%).
• Over 20 years (2001-2021): as over 15 years, Retail is clearly at the top of the ranking with a 20-year IRR of 17,6%, followed by Property (20-year IRR: 12,3%). The other direct real estate assets are then positioned: Industrial premises (IRR 20 years: 10,4%) then Offices (IRR 20 years: 10,3%) and Housing (IRR 20 years: 10,1% for Housing France and 9,4% for Housing in Paris).
• Over a long period: Over 30 years (1991-2021), Equities and Listed Real Estate deliver comparable levels of performance. Housing has performed particularly well over 30 years and outpaces other real estate asset classes. The IRRs of SCPIs and Offices are very close, in line with the high historical exposure of SCPIs to Offices. Over 40 years (1981-2021), stock market investments are the most efficient: Equities are ahead of listed Real Estate by 2 points. Housing in Paris has an IRR of more than 10% over 40 years. Unlisted real estate presents higher performances than bonds.

A still attractive risk/return ratio for real estate compared to other asset classes

Due to these characteristics, real estate is positioned halfway between equities on the one hand and bonds on the other hand and presents an attractive risk-return ratio compared to these 2 references. Risk-return pairs make it possible to position the various investments relative to each other according to the durations observed, by distinguishing for a comparable level of risk, the levels of performance obtained from the various investments or, at a comparable level of performance, the investments which turn out to be more volatile, and therefore more risky.

• Offices and Residential show similar performance and volatility levels over 5 years and over 10 years.
• Over 10 years, Equities outpace Property Investments with higher performance and much more contained volatility.
• Over 15 years, Housing, Offices and SCPIs have performed better than Equities. Compared to Housing and Offices, Retail has similar levels of volatility but delivers weaker performance over 5, 10 or 15 years.
• Over 30 years, Housing France has performed slightly better than listed assets, but with half the volatility.
• Over 40 years, equities show higher levels of performance and volatility than other assets.

Conclusion

For Stéphanie Galiègue, Deputy Managing Director of the IEIF: “the results of the 2022 edition confirm those of 2021 with a stronger dichotomy between the classes of real estate assets whose performances are the most robust, such as Industrial (in particular Logistics) and Housing ( low volatility) and those whose model has been weakened by the health crisis despite the economic rebound that followed: Offices, Retail. However, the performance of assets over the past 40 years has been driven by a particular global economic environment: the coming decades are likely to be marked by deglobalisation, climate deadlines and the aging of the population, in a context of weak economic growth. and high inflation. This will necessarily modify the structure of the economy, of savings and therefore the behavior of the various investments. »