Landlords, how freezing rents would cause the value of your property to collapse. – Insolentiae

Landlords, how freezing rents would cause the value of your property to collapse.  – Insolentiae
Written by madishthestylebar

“Inflation continues to rise and this is weighing on households. According to INSEE, inflation now stands at 4.8% over one year in April, against +4.5% in March and +3.6% in February. If the household cart is hit, so is their rent. In a previous article, we explained to you that the rent reference index (IRL) serves as a basis for revising the rents of empty or furnished accommodation. It is calculated from the average, over the last 12 months, of the evolution of consumer prices excluding tobacco and excluding rents. Because generally, landlords revise the rent every year on a date fixed in the lease.

To prevent these increases from continuing, the National Housing Confederation (CNL) is calling on the government to freeze rents.

The rent freeze, the chronicle of an announced real estate disaster!

The situation of the real estate market is as follows.

1/ Prices are historically very high.

2/ Interest rates are rising very quickly and very sharply, which makes a little more potential buyers out of solvency every day.

3/ In order to be able to continue renting, owners must carry out very major work as part of the energy transition.

4/ Property taxes are skyrocketing as municipalities no longer have sufficient resources.

And in the face of all this, our kind leaders would think it would be a good idea to freeze rents in the midst of inflationary times also for landlords whose yields are collapsing.

The consequences are easily foreseeable.

From today, Monday, anyone who hears of a rent freeze in this context will simply refuse real estate investment.

The market will crash at a speed that will surprise Bercy, sales will freeze very quickly, transfer duties will collapse, and the government, by pulling too hard on the real estate rope, will create a terrible crisis of the housing of which the most vulnerable will be the victims.

In my STRATEGIES file devoted to real estate, I demonstrated that the worst case the real estate market was the combination of a sharp rise in inflation and the freezing of rents. If the government yields to this demagogic decision, then the market will plunge into an unprecedented slump.

If you are a landlord or an investor, now is the time to understand the deadly relationship between rent freezes and inflation.

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Charles SANNAT

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