Macron win will quell fears

France’s vote for Emmanuel Macron as president will do much to calm European markets, including real estate and those who finance it.

France’s vote for Emmanuel Macron as president will do much to calm European markets, including real estate and those who finance it.

For many of Europe’s commercial real estate finance practitioners, Emmanuel Macron’s victory over Marine Le Pen in the French presidential election on Sunday will have come as a relief.

Events of the last year or so have placed politics at the top of property lenders’ lists of concerns, such is the threat to the stability of the markets in which they operate. For many, Macron’s victory will be viewed as a positive turning point for the continent.

Macron might be a political outsider, but the centrist movement which the former Rothschild investment banker has founded is built on pragmatic economic principles and a globalist outlook, in which support for the European Union is paramount. For real estate bankers and alternative lenders who tend to operate across borders and in markets in which risk is closely monitored, the Macron agenda will no doubt be welcomed.

Just as significant will be the fact he is not Le Pen. The French election was viewed by many in the market as another potential shock that could further destabilise the EU, with the far-right nationalist, protectionist and anti-European Le Pen seen as a threat by many in the sector.

The figures show that the market remained fairly calm in the first quarter, although there was a dip in property investment volumes. Fidelity reported that volumes in Q1 2017 were €3.6 billion, 15 percent down on the long-term Q1 average, but predicted a return to the overall quarterly norm of €6 billion-€9 billion in the wake of the election result.

CBRE reported that international investors, including German open-ended funds as well as US and UK investors, were active in the market during Q1. Although there were not many major transactions, one deal illustrated continued overseas interest in the market; Real Estate Capital reported in February that a Korean investment consortium bought the HQ of L’Oreal for €474 million in a deal financed by a €290 million underwrite from German lender DekaBank.

With the destabilising threat of Le Pen neutralised – for now at least – expectations for French real estate are largely positive. The question ahead is how Macron’s policies will affect markets. Among his aims is a cut to corporate tax and an effort to liberalise the labour market. In his bid to present himself to the French people as a genuine centrist, the ex-banker is unlikely to be overly friendly to the financial sector, although his pro-business stance is framed as an effort to boost France’s anaemic GDP growth and reduce its relatively high unemployment levels.

The pro-EU Macron has suggested a common EU budget, a topic on which he will need to convince Germany. He is also expected to support completion of European banking union, which could transfer further responsibility for banking policy to the EU level, creating the potential for a more level playing field in the regulatory supervision of the continent’s banks.

The power for Macron to enact his reforming agenda will come from the performance of his fledgling La République En Marche! party candidates at June’s legislative elections to the National Assembly. This will determine whether Macron will be a reforming president or merely a figurehead.

At MIPIM, real estate financiers described political uncertainty in Europe as the potential disrupter of their sector. That threat has been significantly averted with Le Pen’s defeat, although some commentators warn that unless Macron makes a real difference to France, a 2022 Le Pen victory could yet be a possibility. However, for now, whatever Macron means for real estate, most will be pleased that the far right has not taken the Élysée Palace.