Exceptional real estate embodies the quintessence of luxury and is distinguished by its uniqueness and great diversity. Their valuation requires an individualized approach, because each property has its own characteristics and assets. In the process of acquiring these properties, subjectivity plays a predominant role compared to the usual profitability criteria.
Residential real estate offers undeniable advantages for investors. In particular, liquidity on the market, with prices resistant to economic fluctuations, offering attractive yields and a potential for capital gains on resale. Whether in bulk or in pieces, residential buildings allow a secure diversification of their portfolios.
Government incentives and attractive interest rates via PLS and PLI loans have stimulated the growth of the subsidized housing stock. Framed by strict regulations, they stand out from traditional assets in terms of rental profitability. However, in times of crisis, they offer secure income through state subsidies.
Approved Housing...!
Conventioned social housing, regularly regulated by strict regulations, stands out from traditional real estate assets in terms of rental profitability. Rent caps limit their income potential, which puts them behind other investments in the real estate sector. However, due to their nature meeting an essential housing need, social housing enjoys notable resilience even in times of crisis.
Government incentives, as well as attractive interest rates, particularly via PLS and PLI loans, have stimulated the growth of the conventional housing stock. Despite this dynamic, the social housing market remains narrow and remains mainly oriented towards block sales. Individual transactions remain rare, with less than 10,000 units sold per year in a global market exceeding 800,000 housing sales.
What are the attributes that characterize the “Conventional Housing” asset ?
Social or subsidized housing represents a category of real estate assets subject to particularly strict regulations. These housing units, approved by the State and financed with public funds, are allocated to households with modest incomes.
Their allocation process is closely monitored by public authorities, and their rents are capped in order to guarantee financial accessibility to decent housing for this population. Eligible tenants can also benefit from the Personalized Housing Assistance (APL). In addition, tenants who respect the terms of their lease are entitled to remain in the premises without limitation of duration, thus offering significant residential stability.
What are investors' expectations ?
The appeal of social housing to investors is mainly based on the income security it offers, thanks to a generally high occupancy rate and strong unmet demand on the market. Private investors are also attracted by the potential for rent revaluation at the end of the agreement when exit from the social security system becomes possible.
In addition, properties covered by the ordinary legal regime may see their yield increase. Furthermore, some investors are interested in acquiring the bare ownership of subsidized housing, anticipating an exit from the system at the end of the agreement, which could offer interesting valuation opportunities.
What are the main criteria for evaluating subsidized housing ?
When evaluating a social or subsidized residential asset, various criteria must be taken into account to obtain an accurate estimate. These include recoverable and non-recoverable charges, which can vary depending on the nature of the rental management and rental contracts.
The tenant turnover rate is also an important indicator, as it can influence the stability of rental income. Unpaid rent is another crucial aspect to assess, as it can impact the profitability of the investment. In addition, it is essential to estimate the annual cost of rehabilitating the housing, particularly in terms of repairs and maintenance work, in order to take these expenses into account in the calculation of the net profitability of the asset.
By considering these different elements, investors can obtain a more complete and precise vision of the value of a social or subsidized residential asset.
• Title deed with mention of easements: Analysis of the location of the land in an area dedicated to social housing.
• Housing category PLA, PLUS, PLI, PAS: Types of loans granted for financing.
• Number of lots by typology / size: T1, T2, T3, T4, T5, and corresponding surfaces.
• Cumulative rent: Long-term and capped, it depends on the geographical area and the type of housing.
• Structural vacancy rate: Evictions in progress or apartments currently being renovated The duration of the agreement, and in particular the exit options upon its expiry, play a crucial role in determining the assessment methodologies for subsidized housing.
If an exit from the social security system is possible at the end of the agreement, the expert considers a value aligned with the free market, then deducts the capital loss corresponding to the loss of rental income (compared to the free market rent) over the remaining period until the possibility of uncapping, as well as the costs of works and vacancy.
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- See also !
Exceptional R.E
Exceptional goods embody the quintessence of luxury and are distinguished by their uniqueness and great diversity. Their valuation requires an individualized approach...
Residential R.E
Liquidity with prices resistant to market fluctuations, offers attractive yields and potential for capital gains on resale...
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