When the IEIF compares the performance of different investments over 40 years…
I’Institute of Real Estate and Land Savings (IEIF) today published its annual study on the comparative performance of investments over a long period, the objective of which is to put real estate in perspective with its ecosystem from the angle of performance and risk levels. It retraces four full decades, marked by four major economic crises: the bond and stock market crash of October 1987, the bursting of the internet bubble in the early 2000s, the subprime in 2008, brutal shock to the world economy from 2020 with the onset of the health crisis.
The 2023 edition, with the characteristics of investments at the end of 2022, covers “a period of transition”, note the authors of the study, between “high inflation, sluggish economic growth and rising interest rates”, but also ” deglobalisation, changing lifestyles, awareness of climate deadlines”.
Over 5 years (2017-2022). The performance of industrial premises (covering logistics and business premises) was particularly high, due to the strong appreciation of the market values of logistics over the period. Six asset classes (life insurance, OPCI, Livret A, money market, bonds and property) have IRRs lower than inflation. Over this period, interest rate products had a negative IRR, as did listed real estate with a 5-year IRR of -9.4%, in line with the sharp decline on the stock market.
Over 15 years (2007-2022). Over this period, direct real estate clearly dominates the performance ranking, particularly retail and industrial (with 15-year IRRs of 7.2% and 6.1% respectively). SCPIs are on a par with housing and offices (15-year IRR of 5.7% for the three asset classes). Gold, a countercyclical asset and safe haven, presents the highest performance (15-year IRR 7.4%).
Over 20 years (2002-2022). Retail is clearly at the top of the ranking with a 20-year IRR of 17.3%, followed by property companies (11%): logically since the period covers the years 2005, 2006 and 2007 during which the capital returns of retail assets exceeded 16 points in each of these three years. Property companies mainly exposed to retail also benefited. The other direct real estate assets are then positioned: industrial premises (10.1%) then offices (9.9%) and housing (9.6% for housing in France and 8.7% for housing in Paris) .
Over 30 years (1992-2022). Real estate and housing are ahead of equities with respective IRRs of 10%, 9.3% and 8.8%. The IRRs of SCPIs and offices are very close, in connection with the high historical exposure of SCPIs to offices.
Over 40 years (1982-2022). Investments on the stock market are the most efficient: equities and listed real estate outpace the other asset classes. Housing in Paris has a 40-year IRR of more than 10%.
Midway real estate
Given these characteristics, real estate is positioned halfway between equities on the one hand and bonds on the other hand and presents an attractive return-risk ratio compared to these two references, notes the IEIF.
Over 5 years. Housing France and logistics France outperformed equities.
Over 10 years. Equities present the highest levels of performance, at the cost of much higher volatility than other assets.
Over 15 years. Housing, offices, SCPIs and gold outperformed equities.
Over 20 years. Housing (France and Paris), but also gold outperformed equities and real estate, which experienced performances very close to SCPIs and offices in France, but with a much higher level of volatility.
Over 30 years. Housing France, which significantly outperforms housing in Paris, presents a performance superior to that of listed assets, but with three times less volatility.
Over 40 years. Equities present higher levels of performance and volatility than other assets. Housing in Paris is performing very well, superior to real estate, for a much lower level of volatility.
“The results of the 2023 edition confirm a strong dichotomy between real estate asset classes: those whose performance has been very robust until 2022, such as industrial (particularly logistics) and housing (low volatility) and those whose model has been significantly weakened by the health crisis: offices, shops”, notes Stephanie Galiegue, Deputy Director General of the IEIF. “2022 marks a pivotal year, as economic and monetary conditions have changed radically: sustained high inflation, sluggish economic growth, rising interest rates, thus heralding a new cycle where the challenges posed by deglobalization and the new world order , by climatic events and by the aging of the population, necessarily modify the structure of the economy, savings and therefore the behavior of the various investments. »