Keep calm

Potential buyers of property in France should not be concerned by the new proposed 20% tax on second homes as the actual cost impact is minimal, says Home Hunts

As the most visited country in the world, with over 84.7 million foreigners in 2013, France is a second home property hotspot for foreign buyers. But over the last couple of weeks there have been news stories in the press about a new potential 20% increase in property tax, which could obscure the correct perception that now is an extremely advantageous time to buy property in France.

The suggested increase could form part of an additional budget being put in place in France and would affect areas in high demand, or “zones tendues”. Many of these are locations in which foreign owners have second homes and include certain areas in and around Paris, Annecy, Bordeaux, the Côte d’Azur, Montpellier and Toulouse.

It is estimated that the proposed increase in taxes could bring in €150 million to local councils, but exceptions regarding who has to pay will be also be introduced. Finance Minister Michel Sapin confirmed that those who require the second home for professional reasons and older residents living in a retirement home that own a property will be exempt. Homes that are rented out, rather than standing empty most of the year, will not be charged either.

However, for those that will be affected, should the new increases be brought in to play, the actual costs will be minimal and really shouldn’t be a cause for concern.

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“If this new law comes in, all it will entail is a 20% increase in taxe d’habitation,” says Tim Swannie, Director of Home Hunts. “As most people pay between €500 and €2,500 a year for taxe d’habitation, a 20% increase for non-residents will mean a small increase per annum, so it is not something to be concerned about.”

This is a comment echoed by Les Echos, France’s national financial newspaper, which stated that the average cost of taxe d’habitation in Paris was €464 per year, meaning that an additional 20% would come to €90. A small annual increase of this kind should not affect the decision to look for property in France, particularly as the country is offering such good investment opportunities due to low interest rates, favourable exchange rates and lower house prices.

It is the combination of these three factors that are causing France’s property market to currently provide such irresistible buying conditions.

“House prices have been falling over the past few years in most areas, including Paris, but they have stabilised in some, such as Montpellier, the Riviera and Marseille, and even started to rise in others, such as Bordeaux,” says Tim. “This bodes well for the future health of the market, so before the increases spread it is a good moment to make the most of the price drops.”

According to experts, Eurozone interest rates are the lowest they have been since the euro was introduced in 1999 and foreign exchange rate pairs have moved in favour of overseas buyers – some by over 10% with GBP/EUR at the best level in over two years, meaning a second home based on €1,000,000 is now £100,000 cheaper.

To look at properties for sale in France in Home Hunts’ portfolio, visit www.home-hunts.com, or to speak with a consultant directly, contact the French office on +33 (0)970 44 66 43.