While inflation reached its highest level in more than 30 years, indicators of sustainable productivity intensification recorded record inflows in the second quarter of 2022. However, paperback is not without risks. Especially in times of inflation.
Another blow to savers. Last July, inflation accelerated further to 6.1% More than a year against 5.8% in juan. Either the highest level since 1985. The result? Even after raising interest rates twice in six months, the yield on Livret A still fails to cover inflation. Nothing more than bank books or euro money.
To limit the damage, more and more of you are turning to Real Estate Investment Firms (SCPIs), these financial instruments that allow you to invest in real estate on a reciprocal basis. In the second quarter of 2022, the SCPI group reached the record level of 5.2 billion euros. But do inflation and sustainable intensification of crop production always go hand in hand?
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In theory, parity invested in production is an ideal investment bulwark against inflation. First, because of its high yields: 4.20% On average during the first six months of 2022, according to France SCPI. Some rarely even manage to outperform inflation rates. This is for example the case of SCPI Iroko Zen (7.10%) and Corum Origin (7.03%). Over the past 20 years, the sustainable parity performance of crop production has outpaced inflation nearly every year, notes Jonathan Deaver, founder of mieuxSCPI.com.
It is not dangerous. Because SCPIs are One of the few inflation-constrained savings methods. Concretely, these companies rent out the properties they invest in and get rents in return. However, the latter is indexed to the Rental Index (IRL), the Commercial Rental Index (ILC) or the Tertiary Activities Rental Index (ILAT), all of which take inflation into account.
Linking rents to inflation is a Excellent protection For savers, explains Clement Renaud, co-founder of online brokerage Louve Invest. When prices go up, indicators go up and rents can be reassessed accordingly.
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At least in theory. Because This mechanism is not infallible. Especially in times of high inflation. And for good reason: in order to preserve the purchasing power of individuals and small businesses, the regulator decided to regulate rent increases. Thus, Senat voted for A Dam From the commercial rent index 3.5% for 1 year.
What seriously affects the ability of SCPI to transfer inflation to rents? Not necessarily, answers Clement Renault. For him, this framework measures temporary It only applies to companies Less than 250 salary. However, SCPIs prefer to rent their buildings from major national brands, such as Jardiland or Casino.
But even in the latter case, it was not in their interest to raise rents too much. A very noticeable rise will increase default risk or early departurewhich would hurt finally Profitability, warns Jonathan Deiver.
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The other part of the equation, when calculating REIT returns, is the stock price. For several years, the real estate market has experienced an almost constant increase in prices. All types of housing combined are estimated to increase by approximately 22% Between 2010 and 2020, according to INSEE data.
An increase that has benefited the partners who own shares in SCPI to a large extent so far, as the purchase and sale prices of the latter evolve according to the value of the real estate owned by each of the SCPI. According to Aspim, the average share price of SCPI increased by + 10.01% Between the end of 2013 and the end of 2020.
However, inflation can reverse the trend. Clement Renault believes that price increases have two opposing effects on land prices. On the one hand, inflation has traditionally tended to raise real estate prices, because the cost of living increases and with it wages and rents.
But on the other hand, the high level of inflation forced the European Central Bank to raise key interest rates by 50 points last July. This increase is the first in 10 years, will have repercussions on the rates of loans granted by banks, continues Clément Renault. However, if credit rates increase, fewer people will be able to borrow. Then demand is likely to fall, and land prices may take a hit.
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Is the SCPI stock price likely to fall? Again, it’s hard to make a decision. Because a fall in real estate prices could represent both a risk and an opportunity for sustainable intensification of crop production. Management firms have the advantage of being equity payers, that is, they have little or no recourse to credit to finance their real estate purchases. Jonathan Deever remembers that they use the money collected from the partners as priority.
Therefore, unlike individuals, SCPIs do not have to fear an increase in the cost of loans. This is what makes them strong. In a market where demand is shrinking, SCPI has the added advantage of negotiating prices for the real estate that interests them, stresses Clement Renault, whose SCCI share price should remain stable in 2022.
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