Capital gains tax boost for French home owners

CGT in France

Francois Hollande wants to reduced the waiting time to obtain an exemption from CGT on second homes from 30 to 22 years of ownership. Good news for home owners and the French real estate market, but there is still some mystery.

François Fillon decided in February 2012 to increase the application of CGT in France from 15 to 30 years to get a tax exemption for non-primary residences. President Francois Hollande backtracked. “We will not have to wait 30 years to be exempt from tax. We will bring it to 22 years”- said President, Capital guest on the show on M6 TV. The reform, which could be effective from 1st September 2013, would be accompanied by a “special deduction for 2014”. A news judged positive by professionals, but still leaves much mystery. Bernard Cadeau (Chairman Orpi network), Laurent Vimon (President of Century 21), Matthieu Cany (MD of Sextant French Property) and Jacky Chapelot (Vice-President of the Fnaim) back in detail on this measure. Synthesis of their answers:

• A measure that could unlock the market
The transition from 30 to 22 years was a measure that Hollande was committed to from his election. This is great news, since this waiting period is partly responsible for slowing down the market. Nowadays, many owners of holiday properties in France give up putting their property on the market or prefer to wait for a better time like the next elections which are due in 2017. His application, which could occur as early as September 2013 – three months after the announcement – is also good news. This will have an immediate effect because it takes 3 to 4 months to finalise the sale of a home in France so that current sales will be involved straight away giving more confidence for French sellers to put their properties on the market.

• Inadequate approach to the main residences
The second home market represents less than 8% of transactions in France, the scope of this measure is limited. Although this measure also include rental investments, which represent 15% of the market so a total of 23% of the French property market. It is important to note that main residences in France are still exempt from CGT. Thus this measure should have little impact on the global market.  In addition, changing the tax rules every six months will certainly not help the market and bring confidence. Moreover, in the current context of low purchasing power and rising unemployment in France, There are not many French looking to buy second homes.

• Several caveats, and outstanding issues
This measure was announced as exceptional and could last only 1 year. The risk is to artificially boost the market with a massive arrival of properties for sale from those who have own their holiday and investment properties for more than 22 years resulting in price decrease due to more competition. The real estate market is like the stock market, the sector needs stability, no phenomenon of “stop and go” and uncertainty. On top of of this key measure, Francois Hollande also announced “special measures” related, that has not yet being detailed. There is still an element of mystery (he is quite famous for being vagueness), which could clear up this September.

• Conclusion:
This measure should give a small boost to the French estate market until the end of 2013 and owners who were hesitating to sell their holiday home or BTL in France should benefit from this occasion. For buyers who were hesitating to purchase this is also a good opportunity because there will be more choice on the market and at reasonable prices in order to have quick sales. French mortgages are also at historic low levels which is a good way to protect against currency fluctuations over a long period with small monthly payments.


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This entry was posted on Thursday, June 20th, 2013 at 5:14 am and is filed under French mortgage, French taxes . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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