L'interview Arnaud groussac: Investing in mountain real estate

After many years of a boom market, the real-estate sector is slowing.  At the end of August 2023, a decrease of 16,6% in sales volume over a 12-month period.  An annual decrease of this importance has not been recorded in the past 10 years (source:  notairesdefrance.fr).  According to Arnaud Groussac, a real-estate expert, there are several causes for this historical down-turn:  absence of political ambitions, high inflation in construction costs, increase in interest rates penalizing buyers and real-estate developers, and finally stricter conditions of access to real-estate credit. “For the investors, the increase in interest rates has technically minimal impact.  By reducing the interest from the loan, the projects generate a deficit and therefore minimize the fiscal impact and even optimize it.  But today we are experiencing a blocked market and a game of “poker face” between buyers and sellers,” explains M. Groussac.

A market overall resilient so, according to M Groussac, it shouldn’t see any immediate decline.  This type of asset is synonym to pleasure and evasion and today more than ever, people are combining the financial notions with pleasure.  “Since Covid, we need to work differently, for example three days per week in Paris and the remaining time in the Alps.  This does not mean that you give up profitability, it means that you opt for a management and concierge solution, you shelter your money and you benefit from your assets, with overall less expenses.”

The luxury real estate represents, more than ever, a safe-haven value, not only with the asset itself, but also with the transfer of liquidity. “We notice an accrued defiance towards the banks and the monetary system. This means securing a portion of our financial heritage by purchasing luxury assets, and as the interest rates are higher, this allows us to benefit fiscally, even while contracting less debt. This transfer of savings into real-estate will be the trend in the future years until the return of a positive dynamic.”

Even with the changing climate, it is more judicious than ever to invest in the mountains, but only in certain conditions:  A premium resort, a premium location and a premium development are the basic criteria.  “The high-altitude resorts, of course, but also the resorts with a fundamental luxury basis, with more facilities other than ski cabin cables.  These destinations are inventing to the tourism of tomorrow, multi-season.  I would add two criteria which are accessibility for rapid transfers from main cities, and connectivity which is fundamental, notably for working from a distance.”

The rarity contributes equally to ensure the profitability of the luxury real-estate investment.  In the resorts the opportunities for construction are becoming rarer.  “The property must always be thought for the long-term.  Today more than ever, the decline of the offer makes for a very protected market.  On the luxury sea and mountain market, we have seen an increase of 6% to 8% in the past year, while the remainder of the market is decreasing.  This is very much a safe-haven market.”

Ideally, it would be to create a company, a family company for example and to invest via this company in order to benefit from fiscal advantages coupled with the status of Non-Professional Renter of Furnished Property.  “It is important, in my view, to include a concierge service to this type of property.  It is not a loss of profitability but more a key to peace of mind and longevity.”

The mechanics of re-investing the funds is an equally optimized model, in order to diversify at the sale of a company, with the condition of doing this in the form of a company with concierge services answer to the notion of service, therefore optimizing the fiscality related to the sale.

Today, more than ever, real-estate heritage assets make full sense, not only for the questions of inheritance or contingency, but also for more tangible reasons, like the need for family gatherings, taking care of one’s health, and creating enjoyable moments.  Investing in luxury real-estate “shelters” us in all the meanings of the term.