SCPI: still an attractive investment in 2023?

Investing in SCPI (Sociétés Civiles de Placement Immobilier) units has attracted many savers in recent years. But rising interest rates are raising questions.

Should you continue to invest in paper-based property? In a persistently inflationary environment, investing in SCPIs can be an attractive investment strategy, even if it does entail risks.

Returns and diversification: the two main advantages of SCPIs

Buying SCPI units enables investors to invest in a wide range of real estate assets: housing, university residences, clinics, Ehpad (Etablissement d'hébergement pour personnes âgées dépendantes), hotels, offices... For a fee, the SCPI manages, maintains and leases the properties, and distributes the rental income to unit subscribers.

By investing in a SCPI, you can also indirectly purchase properties abroad, and reach out to a variety of tenant profiles. It's a way of pooling risks. In the event of non-payment by one tenant, the other rents can reduce the loss. What's more, depending on the SCPI's strategy, its assets may appreciate in value over time, offering the prospect of capital gains when the property is resold. Conversely, in the event of a market downturn, the assets held by the SCPI could depreciate, generating potential capital losses.

According to the IEIF study (40 ans de performances comparées - 1982-2022) published in April 2023, SCPIs had an IRR over 15 years (2007-2022) of 5.7% and an average yield (distribution rate1) of 4.53%, according to ASPIM (Association française des sociétés de placement immobilier). Past performance is no guarantee of future returns.

Another advantage of SCPIs is that they keep pace with inflation. Rents can be revised upwards in line with the price curve. On the other hand, inflation can cause asset values to fall.

Slight decline in sales in early 2023

In 2022, the capitalization of SCPIs reached 89.61 billion euros, compared with 78.6 billion euros a year earlier, according to ASPIM2. In recent years, investors have seen SCPIs as an opportunity to diversify their savings. Today, rising interest rates are having an impact on inflows, down 23% in the first half of 2023 vs. 20223. This decline needs to be qualified. According to ASPIM, this amount is still higher than the average for the first quarters of the last five years.

Which SCPI to invest in in 2023?

The turbulence in the real estate market has had an impact on the SCPI market. SCPIs are suffering from falling property prices and rising interest rates.

Nevertheless, it remains an attractive investment for building up a diversified portfolio, and certain asset classes, such as healthcare real estate, are more resilient in the current climate. Individuals with sufficient savings can also buy shares without borrowing from a bank. The price of a unit ranges from 150 euros to 1,000 euros, according to the French Ministry of the Economy4 website, with a minimum number of units to be subscribed, specific to each SCPI. And as part of a long-term strategy, investing in SCPI units can be a worthwhile investment, even if it does present risks. It's worth looking at the IRR (internal rate of return5) of each SCPI over 5 or 10 years to get an idea of long-term returns, although past performance is no guarantee of future returns.

Focus on SCPI Primovie

By investing in healthcare and education real estate, the Primovie SCPI, which was awarded the SRI label in January 2022, is likely to represent a promising and socially useful investment. The aging of the population and the under-funding of healthcare infrastructures are indicators of the need to mobilize private savings to meet future needs. Coupled with operators who lease these real estate assets under long leases (from 12 to 25 years), SCPI Primovie is an attractive investment for any saver wishing to invest in a useful and potentially successful sector. Current tenants are no guarantee of future tenants.

Please note : it is possible to purchase SCPI units through a life insurance policy. This is a way of benefiting from the advantageous tax treatment (under certain conditions) of life insurance: without withdrawals from the policy, the interest earned on SCPI units will not be taxed.

Despite the decline in yields, it is still possible to invest in SCPIs that are likely to offer attractive returns. For any project, it's essential to get the right support to invest with the greatest possible peace of mind.

Investing in SCPI units involves a number of risks, including the risk of capital loss. The investment is considered to be illiquid, and should be considered with a long-term view to asset diversification. The management company does not guarantee the resale of units. Potential income from the fund and the value of units are not guaranteed. They may rise or fall according to the fund's performance, real estate market trends and economic conditions. Past performance is no guarantee of future results.

This is an advertising communication. Before making any investment, please consult your usual advisor. Please refer to the fund information document and the key information document before making any final investment decision.

 

 

 

 

1Distribution rate: division of the gross dividend, before withholding tax and other taxes paid by the fund on behalf of the associate in France or abroad, paid in respect of year n by the subscription price at January 1 n. Non-recurring income comprises distributions of capital gains, tax reset and foreign taxes.

2Study "Real estate funds for the general public - Year 2022" - April 19, 2023 - Aspim

3Communiqué ASPIM du 19 juillet 2023 « La collecte des fonds immobiliers grand public au premier semestre 2023 »

4https://www.economie.gouv.fr/particuliers/investir-SCPI-societe-civile-placement-immobilier#

5The internal rate of return (IRR) indicates the profitability of an investment over a given period, taking into account the acquisition price, the income received over the investment period and the withdrawal value.

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