Rental investment in Lyon, an obvious choice for savvy investors

Key figures :

• Price per square meter: €5,350 for an apartment (from €3,672 to €6,915) 
• Average monthly rent : From 9 € to 16€ per m2 depending on the property and the area.
• 2nd largest student city in France
• Average gross yield: from 3 to 6% depending on the neighbourhood

Rental investment in Lyon is an obvious choice for the real estate investor looking for an attractive city and an interesting rental yield. Indeed, this metropolis comes in 2nd place in the ranking of French cities in which to invest . Lyon benefits from a strategic geographical position: 2 hours from Paris, Geneva and close to Italy. This position has always made it a crossroads of Europe. Its economy is strong and its location in the heart of the Rhône Alpes Auvergne region (formerly Rhône Alpes), the 2nd region in France for its GDP, ensures excellent economic dynamism in the future.

I am Mickael Zonta, director of Investissement-Locatif.com and real estate investor. Passionate about real estate and investment, I would like to share with you my knowledge of the Lyon market. In this article, you will discover the important points to consider if you want to invest in rental property in Lyon. Where to buy in Lyon? What is the price per square metre in Lyon? We will also look at the questions that investors often ask, the first of which is where to invest in Lyon... and conversely, which districts to avoid in Lyon. Finally, we will look at the various empty and furnished rental schemes in the light of the Lyon market, in order to help you decide which is the best tax exemption scheme for rental investors in Lyon.

Real estate investment in Lyon: economic advantages for a long-term investment

One of the first things to consider for any property investor is the level of economic dynamism of the investment location. Lyon is a good example of this. Before investing, ask yourself: how is the job market doing? Is the economic fabric well developed? Does the region have a pool of jobs and companies... or is the only employer a factory that is nearing the end of its life? These questions need to be addressed before you even look at the housing advertisements in the newspaper. A profitable investment over time requires a tenant who pays the rent and I always advise against investing in the countryside if the economic fabric is not solid. By definition, tenants must be able to pay their rent.

In this respect, Lyon has some serious advantages and this is what makes real estate in Lyon so attractive. First of all, it is the capital of the Rhône Alpes-Auvergne region, which is the second region after the Île-de-France in terms of GDP. It is therefore logical that Lyon has a strong economic dynamism with many companies in all sectors, particularly in new technologies.

Economic dynamism : 

• Unemployment rate Q1 2019: 7.7% (national average: 8.6%)
• French Tech Label
• France's 2nd largest economic hub and one of the top 20 richest cities in Europe
• France's leading healthcare cluster: Lyonbiopole and 2nd largest logistics region in France
• 2nd largest city for congresses and trade fairs at the national level
• 5 competitiveness and research clusters, 2 of which are world class

After this first element, you will have to analyze the demographic dynamism. If the investment location empties of its population, then the rental demand will decrease... On this point also, the Lyon metropolis is an example. The Lyon population has experienced an average growth of 1.1% per year over the last five years (source INSEE). The Lyon metropolis currently has more than 1.4 million inhabitants, which makes it the 3rd most populated French metropolis after Paris and Marseille, while having a better demographic dynamism (source Insee Métropole Lyon ).

Population :

• 513,000 inhabitants (third largest city in France)
• 2,310,000 inhabitants (urban area)
• Population growth on the rise: +4% per year

This dual economic and demographic attractiveness is a guarantee of sustainability for anyone who wants to invest in rental real estate in Lyon.

Lyon has been ranked as the top French metropolis in the "city of today, metropolis of tomorrow" ranking. This ranking by Pwc is based on a large number of criteria and Lyon creates a surprise by coming out ahead of major cities such as Toulouse .

Culture and Heritage : 

• An exceptional geographical location (1 hour 40 minutes from the Côte d’Azur by train and 2 hours by road from the slopes)
• Capital of gastronomy
• 12 museums (Museum of Fine Arts, Museum of Confluences, Museum of Cinema and Miniatures, etc.) 
• Highly renowned events: Festival of Lights (1.8 million spectators), Les Nuits de Fourvière (200,000 spectators), Dance Biennale (100,000 visitors, etc.) 
• 4 districts of Lyon (Fourvière, Old Lyon, Croix-Rousse and Presqu'Île) are listed as UNESCO World Heritage Sites (an area of 500 hectares)
• Exceptional monuments: Saint Jean Cathedral, Notre-Dame de Fourvière Basilica and the Gallo-Roman theater, Place Bellecour, Tête d'Or Park, Place des Terreaux, Lyon Opera House

Lyon, a university center of excellence and a leader among student cities

In addition to its economic attractiveness, the city of Lyon is also renowned for its university centres and colleges. Thus Lyon is the 2nd city in terms of the number of students, with 164,559 students registered in 2019, 10% of whom are foreign students.

The student clientele is interesting since the vast majority of students are tenants. Real estate investments in a student residence have a certain profitability. In addition, the parents are guarantors, which allows the lessor to have solid guarantees. Finally, students in Lyon generally rent small areas, such as a studio or shared accommodation, which allows Lyon lessors to have higher rental yields . For the rental real estate investor in Lyon, this population of Lyon students therefore represents an excellent signal.

Students:

• 2nd student city in France and elected in 2018 "Best student metropolis in France".
• 144,000 students
• The University of Lyon ranked in the TOP 10 of the best universities in Europe and 34th in the world (QS Best Student Cities 2017)

It is important to target students' expectations by choosing the area of Lyon according to two categories: on the one hand, the areas of Lyon in which students study, and which some students prefer for their convenience. On the other hand, Lyon's "coolest" neighbourhoods, which attract students with greater financial resources who are looking for prime accommodation in Lyon for a better living environment. Hence the advantage of renovating housing in the centre.  

In this respect, we recommend the Confluence district in Lyon 2nd, even though prices have already risen significantly since the "Confluence" project, Gerland in Lyon 7th and the Part Dieu district in Lyon 3rd. These are all up-and-coming areas, therefore, where property investors can count on the potential for price growth over the next ten years.

The areas of Lyon most sought after by students with the highest financial means are mainly the peninsula, the old Lyon, which is located in the lower 5th arrondissement, and the 6th arrondissement.

Transportation :

• The Lyon Part-Dieu and Perrache stations are equipped with the TGV line, and allow you to reach Paris in 2 hours.
• 4 metro lines including 1 automatic and 6 tramway lines. 36% of home-to-work journeys are made by public transport. 
• + more than 100 bus lines.
• 1000 self-service bicycles
• 1 international airport

Rental yield in Lyon: up to 5.5% gross in Lyon and over 6% in Villeurbanne

Purchase prices in Lyon have increased significantly between 2020 and 2023, with an increase of +11.60% over one year (source notaries, as of June 2021). This increase in purchase prices, a sign of the city's strong attractiveness, makes it difficult to achieve high profitability.

However, there are tax exemption schemes that allow you to reduce the tax rate depending on the law. For example, the rental yield in Lyon can be as high as 5.5% gross if you choose to invest in an old property under a law such as Malraux or LMNP, then renovate and furnish the property.

With the Malraux law (scheme), property investors can benefit from a tax reduction of up to 30%. This scheme is not subject to a rent ceiling, which can be advantageous for your investment.

The most attractive tax exemption scheme, whether it is to obtain a higher rent or a favourable tax rate, is the real LMNP scheme (non-professional furnished renter, with a real tax return). With this scheme, you receive tax-free rental income, valid for a flat or an old residence. In contrast to the Pinel scheme, this regime gives access to a wider choice of flats in the city centre. These are mostly older properties that just need renovation.   

With a few exceptions, we do not recommend investing in the Pinel law in Lyon, which offers very low returns, even including the tax advantage. The Pinel law offers a tax reduction. However, when investing in Pinel, new homes are the most favoured. This means a more expensive investment compared to that made on older housing.

The rule for rental investors is the same as in Paris or Bordeaux: a small studio type space in Lyon or T2 will allow a better return. Larger areas will have to be used as shared flats to offer a satisfactory return.

What type of apartment to choose in Lyon?

The rental investment in Lyon does not necessarily differ from a rental investment in Paris. Thus we always find the same types of products that allow us to obtain a high return while having a strong liquidity at the time of resale. We will advise you to choose according to your budget a studio in Lyon, a T2 or a shared apartment.

As the rental pressure is less strong in Lyon than in Paris, we will opt for slightly larger surfaces in order to better match the reality of the Lyon property market. Whatever the type of property you choose, it must correspond to your target tenants. In this respect, theproperty investor in Lyon must know the neighbourhoods well.

The most attractive system, whether for having a higher rent or a favorable tax system, is the real LMNP system (non-professional furnished rental, with real declaration).

Where to invest in Lyon and which districts to focus on?

Our property hunter in Lyon, has an excellent knowledge of the market. Originally from Lyon, he has worked in several agencies in Lyon for more than 9 years. During these years, Lyon's districts have evolved and the city has been transformed thanks to major projects initiated by the Metropolis of Lyon.

These renovation projects remind us of those in Bordeaux or Paris and demonstrate a political will to develop the city, as well as strong future ambitions. We are thinking in particular of the Lyon Confluence, Lyon Gerland and Lyon Part-Dieu projects, among others, which you can find on the Greater Lyon website.

The up-and-coming districts of Lyon are the confluence in Lyon 2, Lyon 8, Villeurbanne , even if the price of real estate has already increased considerably since the "Confluence" project; Gerland in Lyon 7, the Part Dieu sector in Lyon 3rd.

Prices per square meter in Lyon

Lyon has different areas and you will discover neighborhoods where the price per square meter in Lyon varies greatly . When analyzing the Lyon real estate market at the beginning of 2024, we observe an average trend in apartment prices at a median level of 4,734 euros per square meter. However, some properties stand out for higher values, sometimes reaching up to 7,013 euros per square meter. For specific properties, such as a 3-room apartment to renovate, the average price is 5,579 euros per square meter. Conversely, a 4-room apartment is negotiated around 5,766 euros per square meter. Regarding the house market, a five-room house to renovate sells on average for 4,253 euros per square meter, while its new equivalent is valued at around 4,353 euros per square meter. These figures reflect the nuances of the Lyon real estate market, where the price varies significantly depending on the type of property and its condition (new or old).

Outlook for the Lyon real estate market in 2024 

After a stagnation in prices in 2023, the current period should confirm the renewed interest of buyers in Lyon real estate. The city's good demographic health, its strong economy and the renovation of certain districts should allow prices to continue to increase over the next 10 years.

You wish to invest in Lyon? Contact our team.