Real estate investment demand picks up in France

on Mar 6, 2015

The French real estate market has been stuttering in recent years, hit by 2012’s election of President François Hollande and a weak economy. Research by Savills shows that until 2011 the price of prime property in London and Paris tracked each other closely. London then powered ahead, while Paris values fell, affected by negative sentiment about the socialist leader’s wealth policy plans. Currently, in London the average prime property price per square foot is £1,600, compared to £1,100 in Paris.

Non-residents in France are liable to pay wealth tax on net assets worth more than €1.3million in France, starting at a rate of 0.5 percent. Capital gains tax of between two and six percent is also charged on the sale of any French property by a non-resident, however this can usually be offset against tax paid in their home country. In the run-up to Hollande’s election fears of increased wealth taxes emerged with talks of “price corrections” while the introduction of longer bureaucratic processes led to buyers renegotiating and reneging on deals.

Now, however, fuelled by favourable currency exchange rates, an improving domestic economy and a change of tone from Hollande, international property buyers are returning to France. Mark Harvey, the head of French residential sales at Knight Frank, said as quoted by The Times today: “Hollande is not going to do anything too radical at this stage. A lot of the sweeping changes which were threatened didn’t happen and his rhetoric has changed with him becoming more pro-business.”

According to Harvey, the improved market environment is spurring a recovery in real estate investment demand. “The Americans are back and the British are returning with 50 percent of our inquiries for French properties now from Brits — up from 28 percent two years ago. There is a notable change in interest, particularly for properties between €700,000 [£509,000] and €1.8million.”
According to Leggett Immobilier, British buyers returned to the French property market in 2014, buying homes for holidays and investment. Last year, the real estate agent recorded a 43 percent increase in French properties sold, with buyers from 33 different nations. British investors topped the sales table, followed by buyers from Belgium, the United States, Australia and the Netherlands. According to market observers, 2015 is set to see continued positive development.

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