Returning to the university world often involves asking a question about housing, as it is often an opportunity to leave the family nest. Due to the housing shortage affecting the national territory, is it wise to invest in real estate to accommodate your student child? When should you choose to rent? Do higher interest rates have a big impact? Advice from the National Real Estate Association (FNAIM) to make the right decision.
Choice: rent or buy
A large number of future graduates are about to join the very long list of “Housing Candidates”. For parents and future students, this is an opportunity to choose between rental and acquisition.
These are two different strategies, the advantages of which depend on the target cities, the type of property, the budget, the estimated duration of the studies, the possible aid depending on the project (allowances, renewal bonuses, etc.), but also the possibility and desire to build the heritage”, emphasizes FNAIM.
Besançon: a small difference between the two options
If we compare the amount of the monthly payment that the purchase may represent with the average rent for a studio of 25 square meters, the difference between loan repayment and rent is negligible in certain cities.
In Besançon, for example, it will be necessary to pay, always for the same property, €303 per month if one chooses to rent, as opposed to €319 per month for purchases over 20 years old.
Saint-Étienne: The monthly loan installments are less than the rent
In Saint-Étienne and Nancy, it is cheaper to pay off a loan to buy a studio of 25 square meters than to rent. Either for the first monthly credit payment of € 189 against rent of € 268 per month (30% less) and for the second monthly payment of € 362 against rent of € 366 per month (- 1%).
To make your selection, “You have to be careful to take into account all the cost criteria, and to accurately compare the rental price with the monthly loan payments,” explains Jean-Marc Touroleon, President of FNAIM.
In Paris, the opposite, it’s better to stay as a renter: €749 per month if you choose to rent the studio, compared to €1,394 per month for buying over 20 years (+86%).
Nancy, Amiens, Grenoble … the best rates of return
The rate of return (that is, the ratio between annual rental income and the purchase price) is also an item that must be carefully considered. “In financial terms, this is the element that will serve as a benchmark for you to assess the profitability of your investment,” explains Jean-Marc Turillion.
It is therefore essential to anticipate all fees that may affect the budget (condominium fees, property taxes, potential employment, etc.).
In terms of a net rate of return for acquiring a studio of 25 square meters whose average rent is always higher than any other apartment, Nancy tops the FNAIM rating (with 5.3%), ahead of Amiens (5%), Clermont-Ferrand (4.7%), Marseille ( 4.2%) and Grenoble (4.2%), far ahead of Lyon (2.9%) and Paris (2.5%).
“The rate of return is one indicator among many others. Because in Nice, Rennes or Lille, the rate of return offered around 3.5% is interesting, but it must be reduced to the purchase price (between €110,000 and €120,000 for an area of 25 square metres) , which is elusive of all budgets,” notes Jean-Marc Turillion of FNAIM.
Saint-Étienne: Good potential gain from resale
For those choosing to invest, the potential gains from resale should also be considered. However, this varies greatly by city, economic context, and length of detention. Thus, in Saint-Étienne, according to FNAIM, this profit will be 2,800 euros in the case of resale after three years in the context of stable prices. In Grenoble it will be 667 euros and 432 euros in Metz.
The operation will be more interesting with a resale after five years of ownership, and a gain of 6,609 euros in Saint-Etienne, Grenoble and Metz.
Lyon, Strasbourg, Lille: losses if you resell after three years of purchase
In Lille, in the case of a resale after only three years of detention, if prices remain stable, the potential gain will eventually become a loss, estimated at 3,114 euros. The amount will reach 3,445 euros in Rennes, 4,418 euros in Strasbourg, 5,494 euros in Lyon and up to 12,516 euros in Paris.
In Dijon, the loss will be 612 euros, but by reselling after five years, we will make a capital gain of 3,216 euros.
According to FNAIM, it is necessary to include all costs related to the purchase (agency fees, notary fees, etc.) in the calculations that could affect potential capital gains at the time of the resale.
On the other hand, by reselling after five years of holding, one can make capital gains in all cities, except for Paris, Lyon and Strasbourg. But that will be the case five years later if prices increase by 2% per year during this holding period.