Emmanuel Macron and the French Property Market.

MacronIn an environment of low interest rates, global instability and low returns on investments, investments in French property have increased over the last few years.  Will this continue following the election of our new president?

Key tenets of Macron’s property policy

  • Exoneration from 80% of the population will be exonerated from paying Taxe d’Habitation

A key policy for Macron.  From 2020, households earning less than €5.000 per month will be exempt from paying this tax.  As this is one of the primary sources of income for local government, he has promised to pay €10 billion per annum to local authorities, which is likely to be raised by increasing other taxes.

  • Reform of Impot sur La Fortune (ISF)

This tax is currently payable by those with assets valued at over €1.3m on both investments and property.  Macron will replace this with a tax on property assets alone with the aim of improving market liquidity and encouraging investment.   The value of a main residence will be reduced by 30% for calculation purposes.

  • Build new homes in areas of need

These areas include Ile de France, Aix-Marseille, the Swiss border and Toulouse.  The state will be able to use national interest in order to grant building permits in these areas.

  • Improve access to housing for young people

Macron has pledged to build 60.000 homes for students and 20.000 homes for working young people.  He also aims to create a further 30.000 council homes for young people.

  • Creation of a professional mobility lease (bail mobilité professionnelle)

The president intends to create a short term lease of between three months and one year for young people on short term contracts to improve social mobility in areas of high demand.

  • Capital Gains

No change is proposed in relation to Capital Gains.  The 22 year limit will be maintained.

  • Encouraging buy-to-let investment

The president intends to prolong the Loi Pinel which promotes private investment in property, and prêts à taux zéro (zero interest loans) in order to maintain investment in the sector.

  • Introduction of measures to renovate homes

France has a large stock of old housing which is poorly insulated.  Tax credits and grants will be introduced to assist with the energy efficiency of these homes with the aim of renovating half of the energy inefficient housing stock by 2022.

Effects of these policies on the property market

Macron’s property policy has the intention of invigorating the new-build market, improving the energy efficiency of the housing stock and encouraging access to the market.

The replacement of the Impot sur la Fortune (ISF) by the Impot sur la fortune immobilier (ISI) in 2019 is the policy which is expected to have the greatest effect on the property market.  Although the level of this tax is low, starting at 0.5% per annum calculated from €800.000 of total property assets valued at €1.3 million or more, it is likely to have two effects:

  • Existing second home owners and some investors may choose to diversify their portfolios, and sell property assets in order to invest in more liquid investments
  • Those looking to purchase investment property may choose to take out a mortgage rather than purchasing in cash.

We feel that Macron’s policy will not lead to a downturn in the market, especially given continuing global uncertainty which tends to lead to a flight to safety, in other words bricks and mortar.

Of course all of these policies will need to be voted by parliament, so until the results of the legislative elections are known on 18 June, we cannot guarantee that they will come into effect.

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