Real estate, this "structural need" that resists inflation

Real estate, this “structural need” that resists inflation

To combat inflation and in the face of an uncertain macroeconomic environment, Horizon AM teams have devised for themselves a strategic deployment policy that aims to focus on the processes that make these risks well tolerated. Mehdi Jiji, President of Horizon AM, explains the foundations and objectives of this strategy.

In the context of peak inflation, price hikes and the war in Ukraine, is the residential real estate market showing resilience in spite of everything?

Mehdi Jiji: When we talk about real estate, we must first of all be concerned with the psychology of actors and producers. It is a matter of trust. Those who produce real estate know this: there is uncertainty, especially with regard to construction costs, which have been rising for more than a year and a half. There is also inflation to which the supply shock after the coronavirus outbreak must be added. Then there is now the war in Ukraine. We are witnessing a shock to raw materials and energy in general, which is generating uncertainty. Of course, this is not without consequences for real estate players. facing shortages of some materials and halting construction sites. All this has an impact on producer confidence which, given the general context, proves to be of lower quality at the moment.

In the short term, they are less quiet. But there is still a response from the government and the police that allows real estate players to adapt to this very special context. This is particularly the case for everything related to review items.

However, on the part of buyers, there is no significant change. Especially on the side of larger buyers of private residential land. On the other hand, the uncertainty relates to more and more individual buyers who are facing difficulties related either to the wear rate or with respect to their credit being given due to the tightening of HCSF granting terms. Real estate buyers are currently in a somewhat precarious state. However, we must be wary of short-term effects and economic tensions. It is important to make the situation relative, to relativize these short-term disturbances to social behavior in the buying process.

What we must remember is that real estate remains a good bulwark against inflation, as it fulfills a structural need. The fundamentals regulating the act of production and the purchasing process still remain.

What are, concretely, the consequences of the war in Ukraine on the real estate market in France?

Mehdi Jiji: The war in Ukraine has little impact on the real estate market in France. There is, of course, this supply chain that has been somewhat panicked by this in recent weeks, but it has had a very relative impact. It will be more than Russia, as an oil and gas producer, can have an impact on real estate because the issue here is above all a matter of materials. This can be seen especially with the provision of tiling. But it is not directly related to Ukraine, it is above all related to the problems of means of supply.

What strategy have you chosen to develop to counter this unstable macroeconomic environment?

Mehdi Jiji: At Horizon AM, we produce savings solutions for individuals and organizations for housing finance. Our goal is to focus on real estate transactions where we can have pricing power over the sale price (where we can set the sale price). This is an important strategy for us and for the players we work with because it involves finding sites that allow us to do this.

We have stock selection strategies so that we can choose the trades in which we can include our prices in the selling prices. It is also for this reason that we have started selling certain operations (less than 2000 square metres). We do arbitrage where we reduce the importance of some activities and where we focus on some other activities which have good resistance compared to inflation. This is especially true of nurseries, coloring operations, nursing homes or even property dismemberment.

These processes, in fact, present the possibilities of resistance in an inflationary context. This strategy allows us to provide provisioning solutions that adapt to the context by focusing on topics that are resistant to this particular environment.

In partnership with Horizon AM

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