An SCPI (société civile de placement immobilier) is a financial product offered by a property management company, enabling investors to invest in a proportion of property assets via shares in the company. The aim of these investments is to offer the returns and security that real estate can provide, without the constraints of physical property management. Paper-based investments, as they are known, have suffered a number of setbacks in recent years. But why?

Why has the value of SCPIs fallen?

The paper-based property market experienced some turbulence following the rise in interest rates. This rise has had a significant impact on SCPIs and on the property market in general. When interest rates rise, the property market slackens because it becomes harder to get loans, and borrowing costs more. This phenomenon has had an impact on property management companies, particularly because they sometimes use variable-rate loans. The consequence for some SCPIs has been a fall in the value of their assets, and therefore of their respective shares.

Is there a risk in investing in an SCPI? Why is investing in SCPIs still attractive despite the downturn?

Yes, investing in an asset always involves risk, but the risk is very low for SCPIs, which makes their risk/return ratio very attractive.

First of all, let's look at the decline in their value. SCPIs have lost value, but they have continued to distribute their income. With the rise in interest rates leading to massive withdrawals by insurers, some management companies are experiencing liquidity problems with some of their vehicles, but they are continuing to create new business. This clearly shows that if you select your SCPIs carefully, even if interest rates rise sharply, you can maintain the level of income paid out, and the fall in the value of your units has been small or non-existent. What's more, investing in an SCPI is a long-term investment, and a fall in asset value over a short period will not have a significant impact on the growth of your portfolio.

A fall in SCPI prices: is now the right time to buy?

In the current climate, with interest rates starting to fall, banks are relaxing certain conditions and making it easier to borrow. You might think that property prices would start to rise again. Given the value of property investment trusts (SCPIs), now could be a good time to invest, including in those that have fallen in value, as this would be a good entry point into this type of asset before their value rises again.

To take advantage of this opportunity, contact your Finankap Group Wealth Management firm. After a full analysis of your situation, your adviser will offer you a selection of the best SCPIs available according to your objectives and plans. Contact us!