On Sunday 7th May, France elected Emmanuel Macron its new President of France. The centrist politician won two-thirds of the vote, far outstripping his far-right rival, Marine Le Pen. The 39-year-old is the youngest person ever to be elected leader of France, and his campaign was one based on changing the status quo and introducing a new era of politics for the country. What changes will he be bringing about for real estate investors?
The optimistic tone arrives just as the French property market begins to emerge from its own period of stagnation: across Francois Hollande’s rule, French house prices fell around 4 per cent, with the economy also witnessing sluggish growth. In recent months, though, the market has begun to show signs of improvement, with prices up 1.8 per cent in the fourth quarter of 2016, according to INSEE.
After a period of speculation over whether Le Pen would win the vote, the election’s result has been welcomed by the property industry, as the positive outlook proves infectious.
“The property market has been improving throughout France for the past couple of years and his government want to build on this”
“We are delighted about Emmanuel Macron’s victory. We have absolutely no doubt that he is the right man for the job,” Tim Swannie, Director of Home Hunts, who specialise in French luxury property, tells TheMoveChannel.com. “The property market has been improving throughout France for the past couple of years and his government want to build on this.”
Indeed, investors have been drawn increasingly to the French market in the last year, with record low mortgage rates and the renewed potential for capital growth making the country’s property more attractive than ever. According to Notaires, property sales hit a 10-year high in 2016, while February 2017 saw sales rise 7.7 per cent year-on-year, even surpassing the peak figure recorded in May 2006.
Foreign buyers, though, will be keeping an eye on Macron’s financial policies, after his campaign promised to review France’s Wealth Tax.
“It is true that Macron has promised to review France’s Wealth Tax and whilst I expect to see some changes I do not believe these will be significant for second home owners in France,” says Kate Everett-Allen of Knight Frank. “It is more likely that any changes to the Wealth Tax will, at least initially, benefit French nationals and primary residences first as a way of encouraging French expats to return to a more ‘tax friendly’ environment.”
Other hot button topics that Macron may tackle include the ongoing issue of affordability and supply in Paris, with other countries facing similar overheated markets introducing cooling measures to bring prices back down. So far, though, Macron has instead placed an emphasis on the importance of supporting construction and reducing bureaucracy to help speed up house-building to address the physical shortage of homes.
Simplifying regulations overall is certainly thought to be on the cards for the property industry, something that agents are looking forward to being implemented.
“He has repeatedly committed to reducing some of the taxes for property owners and simplifying the fiscal framework in France,” comments Swannie. “He is unlikely to reduce Capital Gains tax but has promised to bring in a certain number of changes, which include the exemption of the majority (80 per cent) of households from paying the annual taxe d’habitation as well as reducing dramatically the Wealth tax paid each year and simplifying rental contracts.”
“Capital Gains Tax on French property was originally devised to encourage long-term ownership and discourage short-term speculation,” adds Everett-Allen. “It functions on a Taper Relief basis progressively reducing over 22 years to 0 per cent. The only change I would expect in this regard would be a shortening of the term – perhaps to 15 years – to reflect a more mobile and modern society.”
He will, however, face a challenge to bring about any significant changes, as he has no elected representatives to push through his policies – his party (En Marche) was only created a matter of months ago. Indeed, attention will now turn to June’s assembly elections, where Macron will be hoping to gain some vital support. This, combined with his notably pro-EU view, makes him a reassuringly stable hand on the national helm: his pro-business, centrist stance contrasts heavily with the isolationist polling results in the USA and the UK in the last year.
“The outcome has already had a positive impact on the French and European markets…”
After 2016’s Brexit and Trump surprises, Swannie says that investors have been more politically aware than usual, asking more about the situation and what its implications might be for investing in France.
In the fortnight before the French election, enquiries for French property on TheMoveChannel.com dipped by 50 per cent, while enquiries across April dipped 9 per cent month-on-month. MGM French Properties also reports that a number of “very serious buyers” held off from purchasing property until the election results were announced.
The certainty of a Macron presidency, therefore, is the best possible cure for buyer caution.
“Whilst his agenda will be tough and likely to face resistance, any advances in these areas will be good for the image of France, consumer and investor confidence, the property market and the second homes market,” says Everett-Allen.
“Now we know the outcome, we expect confidence to return, both from a domestic point of a view and for purchasers further afield,” comments Richard Dean, Sales Manager at MGM. “The outcome has already had a positive impact on the French and European markets; with the euro up against the dollar and the country now on course for an economic resurgence.”
Knight Frank, meanwhile, reports accelerating activity throughout the start of 2016, with the strong US dollar boosting US demand for property and low rates encouraging lending. In April on TheMoveChannel.com, meanwhile, enquiries still rose for the most popular hotspots among investors: Languedoc-Roussillon saw enquiries rose 36 per cent, PACA saw enquiries rise 45 per cent, while the Rhon-Alpes saw enquiries almost double.
“It is very early days and this next 4-6 weeks are key,” reflects Swannie. “Monsieur Macron needs to make important appointments in his government and then there are the assembly elections in the middle of June, there is a huge amount on his plate and there will be many new policies and tax changes to come, of course.”
When it comes to change, though, the broad sentiment is that things can only get better – and may be already. In the year to May 2017, the Notaires de France estimate that house prices have risen 6.1 per cent, with Paris and the Ile-de-France region leading growth, with values up 4.4 per cent and 3.1 per cent respectively.
“France now has a strong and dynamic leader and we are excited about a bright future for France and the French property market under his leadership,” adds Swannie.
“Macron is not looking for a ‘revolution’ of the property market, it is already heading in the right direction.”Google+