Sentiment in the European real estate investment market remains strong as investors seek higher yielding property assets relative to other asset classes such as government bonds. Investors have generally been focussed on core assets in countries with sound property fundamentals and economic outlook. As such, Germany and the UK have "ticked that box" and more recently, the Nordics markets. However, there has been a notable absence of France on investor shopping lists over the past year for a number of reasons, notably political uncertainty and a weak economic outlook which is partly a result of problems with labor market flexibility.
Initial signs suggest the tables may have started to turn in recent months, since Macron was elected in May. The change in the French president has generally been well received by the French population and business leaders alike, signalling a positive change in sentiment for France. Since Macron was elected, he has already started to introduce "deep unprecedented reform of the labor market crucial to our economy and our society". He explained that he expected the effects would be profound on "employment and in particular for the young and the lower qualified".
The Macron reforms include:
- Unprecedented labor market reform; including high-profile labor law changes;
- Decentralize collective bargaining power, so allowing companies to reach deals of their own with workers rather than being forced to comply with industry-wide consensus;
- Companies will face less risk of legal action when dismissing workers and multinationals will be able to close loss-making operations more easily.
Source : UBS AG