Why Is Real Estate Still the Favourite Investment of the French?

The Analysis: Property, a Cultural Reflex as Much as a Financial Calculation

Ask ten French people where they would put €100,000. The majority will say: in property. This is no accident — it is the result of a patrimonial culture built over decades, a tax framework that long favoured real estate, and a seductive argument: *you can touch your investment, see it, live in it*.

But is it truly the optimal investment? Or is the preference for property partly an illusion — the kind that markets love to exploit?

The nominal rise of French real estate over twenty years is impressive. But a large part of that rise merely compensates for inflation. In real terms (adjusted for inflation and charges), properties in tight markets often deliver performances far less spectacular than commonly believed.

The problem is not that property is bad — it is that it is often poorly evaluated.

Leverage: the Real Engine of Property Performance

The most underestimated — and most dangerous — feature of real estate is not the gross rental yield. It is leverage. When you buy a property for €200,000 with a €40,000 deposit (20%), you control an asset five times your stake. If that property rises 10%, you do not gain 10% on your money: you gain 50% (€20,000 gain on €40,000 invested).

This banking leverage — a feature of real estate that individual investors cannot easily obtain on other assets — explains the wealth built by many French property owners since the 2000s. The low-rate environment made this mechanism even more powerful: borrowing at 1–2% to finance an asset yielding 4–5% gross was close to pure arbitrage.

But leverage is double-edged. If prices fall 15%, an investor 80% financed actually loses 75% of their own capital. And unlike a stock that can be liquidated in seconds, a property takes months to sell — often at exactly the moment when you need it most.

The Anecdote: When Irish Property Collapsed

In 2007, Ireland was the European country where faith in real estate was most absolute. Prices had tripled in ten years. Banks were granting 100% loans. Irish people were buying off-plan apartments in Dublin, Cork, Galway — some were buying multiple properties.

Then rates rose, American banks trembled, credit dried up. Between 2007 and 2012, Irish property prices fell by nearly 55%. Hundreds of thousands of households found themselves in negative equity — their property was worth less than their debt. Entire neighbourhoods of new builds stood empty, nicknamed "ghost estates."

It was not the Irish stock market that had collapsed. It was property — the "risk-free" investment.

Spain, the United States, and Greece experienced similar dynamics. Property can be an excellent asset class. It is not immune to cycles.

The Historical Fact: Japan's Property Bubble (1991)

The Japanese case remains the most striking example of what a large-scale property bubble can do. During the 1980s, Japanese property prices exploded — at the peak of the bubble in 1991, the total value of Japanese land represented four times the GDP of the United States. The Imperial Palace in Tokyo was worth, on paper, more than the entire state of California.

When the bubble burst, prices fell for 15 consecutive years. Millions of Japanese people watched their wealth evaporate. Banks went bankrupt. The country entered a "lost decade" — then two. Thirty years after the peak, property prices in some Japanese cities had still not recovered to their 1991 levels.

Property rises over the long term. But "long term" can mean a very, very long time.

The Concept: Real Return vs Nominal Return

When someone tells you "my flat gained 80% in twenty years," they are talking about nominal return. To honestly assess performance, you must subtract:

• Inflation (approximately 2%/year over twenty years = ~50% cumulative)
• Charges (property tax, service charges, repairs, insurance, vacancy)
• Cost of credit (interest paid over the full loan term)
• Transaction costs (notary fees at purchase = 7–8%, agent at sale = 3–5%)

Once these factors are integrated, the real return of many rental investments falls between 1 and 3% per year — sometimes less. Not zero, but well below popular perception.

What "works" in property is often the leverage and the discipline — not the magic of bricks and mortar.

What This Changes for You

Property can be an excellent tool for building wealth — especially when rates are low, leverage is used intelligently, and you buy in areas with strong potential. But treating bricks and mortar as a "risk-free" or "failsafe" investment means closing your eyes to fundamental elements: cycles, rates, liquidity, real cost.

At Axone Capital, our Macro · Technical · Mindset approach applies to every asset class, including real estate. Macro tells you where rates and the credit cycle stand. The technical lens tells you if prices are stretched. And mindset protects you from familiarity bias — the idea that an asset you "understand" is necessarily safe.

The right question is not "property or stock market?" — it is "which asset, in which context, with what level of leverage?" Understand the system, not just the label.