France’s election campaigns of the past weeks seemed like a tight race, with many observers watching if the populist Marine Le Penn would be victorious as Trump was in the US last year. To the relief of many Europeans, Emmanuel Macron won the elections.
What does this mean for the French economy, specifically the property market? If you are looking to retire in France, perhaps buy a property with your income, the coming months have a promising outlook. Bob Richards, investment expert at Retirement Income, believes it will be a good Summer for buy-to-let owners in France.
“There will likely be a good number of business tourists this year, and homeowners could make a killing renting out their available flats. The country is currently enjoying an optimistic economic atmosphere following its elections,” says Richards.
Why are property investors particularly happy with the results? Here are some schools of thought:
Although a lot will depend on whether Macron’s party can sweep the majority vote in the June legislative elections, there are already many announced policies that could affect the property market in a good way.
France’s property market which has been gaining ground since the first quarter of 2017 has continued to do so since the announcement of Emmanuel Macron as president last week. Instead of changing the existing policies, Macron will be looking to build on them. He has already made suggestions that will boost market performance.
Economists believe the wealth tax will be reviewed to focus completely on housing. The result of this will no doubt encourage homeowners to sell their properties, thus creating more opportunities for foreign buyers in the market.
The upward trajectory of France’s property market
The past couple of years has seen positive growth in the property market across France. It is something the new administration will want to build on. Macron has already made plans to reduce taxes for property owners and streamline the financial framework in France.
It is unlikely that President Macron will reduce the capital gains tax, but he has promised to introduce some welcome changes. Among them are the removal of the annual tax d’habitation, which almost 80% of home-owners current pay. This will significantly reduce the annual wealth tax and ease the terms and conditions in rental contracts.
The wealth tax changes
It is more likely that any modifications to the wealth tax will first benefit French citizens and primary residents hence encouraging French expatriates to return home and invest in the tax-friendly environment. It is possible that the positive tax changes might come as early as the medium term.
Another critical area President Macron’s government may face is the affordability of property in the country’s capital. Like many major cities around the world, housing in Paris is turning out to be quite expensive for regular folk, and there are measures to make them less so.
People will continue to debate the problem of availability and affordability; however, some pessimistic economists believe it will take more than a few tax exemptions and cooling measures to restore the issue of shortage in Paris.
President Macron’s commitment to the construction industry
During the course of his elections, Macron continually pledged his support to the construction industry and promised to reduce bureaucracy as well as the Government’s intervention in certain processes.
A mentioned, France’s property experts don’t expect to see any changes in rental legislation or capital gains tax. But they expect that his government will want to calm the property market and maintain the current raft of legislation.
The capital gains tax was originally implemented to discourage short term speculation while promoting long-term ownership. It is progressively declining over 22years to 0%. A property consultant, Harvey, believes it may be cut down to 15 years to reflect a society that is more modern and mobile.
The impact on international investors
Demand from British investors is likely to slow a bit in the following year because of the Brexit effect. However, there is promise from other international buyers who will be looking to capitalise on the opportunities available.
Areas like the Alps, Cote d’Azur, Provence and Paris especially have recorded up to four times the number of property enquiries as opposed to 3 years ago. Generally, the demand from international investors appears to be bullish because of affordable prices, a stronger US dollar, considerably low interest rates and better economic activity.
Experts say local residents will be encouraged to apply for a mortgage, while companies will be interested in moving their business to France.
President Macron has vowed to maintain a strong and unified Europe. This should see more expats coming in to buy their own neat parcels of land and property in France.