Interview Didier Corne-Demajaux - 01 December 2008

“We saw rents rise by an average of 2.1% in the first 8 months of the year, although this conceals a number of significant regional and local variations. For example, rents rose more slowly in the Auvergne and Limousin than in Aquitaine or the Provence Alpes Côte d’Azur region.
But even this average increase is very modest compared with what we’ve seen in previous years. However, investors need not be unduly concerned, because in the current economic downturn, investment is falling and markets are standing still. Already in short supply, rental property will become even scarcer and rents will be driven up as a result of demand outstripping supply. Investment in rental property remains profitable over the long term, as long as you select your investments carefully in terms of location, type of accommodation, surroundings, etc.”.

“Traditionally, it’s the size of a property that has dictated its rental value: so, for example, a studio or two-room flat could achieve perhaps 50% more per square metre than a larger apartment. Although small apartments commanded proportionately higher rents, tenant mobility is also higher in this market. On the other hand, a family apartment will need to be re-let less often, and will therefore attract a higher rent review when the time comes to write a new lease.
Today though, the main influences on rent levels are location and surroundings. So in the Paris Region, the average rental is €17.50/m2. In other large towns and cities, the figure is around €10/m2, whilst in a very rural area like Cantal, it’s unlikely to be more than €5.30/m2.
The address of a property can therefore be more important than its features. Even a basic studio on the seventh floor of a building without a lift could fetch an outrageous rent, if it’s in Paris with a view of the Eiffel Tower, whilst a huge, well-equipped ground floor flat in a city where rental property supply exceeds demand may stand empty”.

“There’s no mathematical formula for setting the right level of rent, so it’s usually set on the basis of the market average per square metre, adjusted to reflect the individual circumstances of the property.
It’s actually quite similar to the process of valuing a used car, because the rental value of a property also varies according to the expectations of buyers. In the same way that the price of a car varies according to its condition and optional extras, so the price of a property will vary according to its aspect relative to the sun, its energy rating and so on…”

“Selling prices and rentals are always linked. Contrary to what most people think, the trend in rental values actually leads the trend in selling prices. That’s why CLAMEUR, with its monitoring of rental trends, is a reliable and predictive indicator of the property market.
The explanation for this is simple. The rental market moves faster than the sales market and is more responsive. It is therefore quicker to reflect any upward or downward movement. If rentals fall, then buy-to-let investors will naturally look for properties capable of generating a higher yield per square metre, and will therefore be ready to invest in buying property at a price lower than would have been possible if the market were stronger. So not only does a rise or fall in rentals have its eventual effect on selling prices, but the upward or downward influence on value is actually amplified by a kind of leveraging effect.
But it’s important to remember that property is an excellent investment and has always proved to be profitable over the long term. Unlike the unpredictable fluctuations seen in the stock markets, the property market obeys rules of supply and demand in a very transparent way”.