Wealthy investors are rekindling their interest in French property now the government has clarified capital gains tax laws.
The market was on the verge of collapse after a series of declarations by President Francois Hollande that threatened to axe tax breaks and increase capital gains tax for the most wealthy property owners.
Now, the government has tempered tax demands by offering a one-year capital gains tax discount on property sales between September 1, 2013 and August 31, 2014. CGT on these sales will be reduced by 25%.
The minimum holding period for a second home to attract maximum capital gains tax relief was also reduced from 30 years to 22 years.
French estate agents explain that The Rhone Alpes, Provence Alpes Cote d’Azur and Aquitaine are hotting up as favourite destination for wealthy expat investors.
Lower prices
Agents suggest that prices are lower in many parts of France now than they were 12 months ago, and that a large property is much cheaper than in recent years.
Mortgage rates starting at just over 2% and are also attracting rich investors who can leverage their purchases at up to 80% loan to value.
The latest figures from The French Real Estate Federation (FNAIM) report a 3.6% drop in property prices in the first six months of 2013 compared with 12 months earlier.
The FNAIM also explains a large variation in prices across the country – with some rural areas reporting larger falls.
“The aim of the capital gains tax changes is to encourage second home owners to sell their properties,” said a FNAIM spokesman.
Tax changes
One British estate agent running a Leggett Immoblier in France says the number of wealthy expats looking for property bargains in France is growing.
“Tax changes are tempting property investors from overseas back into the market,” said Trevor Leggett. “Our prestige property website searches have doubled compared to the same time last year, when the doubt over the future of capital gains tax and second homes was putting off investors.”
FNAIM is also protesting against tenancy deposit protection rules and other laws that favour tenants in private rented homes.
The organisation says the legislation is unfairly weighted towards the tenants and penalises landlords too much, while allowing tenants too many unfettered rights.
Meanwhile, Corsican politician Paul Giacobbi wants a blanket ban on any off-islander buying a home on the French Mediterranean island.
“Too many second homers are pushing up property prices and forcing islanders to rent rather than buy,” he said.
