Knight Frank reports that foreign buyers are flocking back to France after a short disruption in sales caused by the country’s announcement that property sales and ownerships taxes were likely to change, particularly for premium real estate. The buyer exodus that caused sales to slip also caused prices to drop and experts believe it is these newfound deals that are enticing foreign purchasers back to the market. Changes have been made to France’s property tax structure, but many have found that the changes were not as bad as once feared. For more on this continue reading the following article from Property Wire.
Uncertainty over potential tax changes in the second half of 2012 led to a fall in demand for prime property in France but now buyers are cautiously returning.
Prices are still declining slightly but this means that where buyers perceive that they are being offered value for money they are going ahead and this is resulting in higher sales volumes, according to the latest Insight France report from international real estate firm Knight Frank.
It points out that there has been a measured but nonetheless welcome change in the attitude of prime international buyers looking to purchase in France, especially among buyers from northern Europe and the number of French sales completed by Knight Frank rose by over 20% in the 12 months to March 2013 compared to the same period a year earlier.
This uptick in interest was also evident on Knight Frank’s Global Property Search website, an unique barometer of demand for prime property. The site recorded a 19% increase in French property searches in the first two months of 2013 compared to the corresponding period a year earlier.
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Although French President François Hollande further clarified his new tax plans in France’s September budget and has indicated that he will keep tax under review, it has taken several months for the finer detail of tax changes to emerge.
According to Kate Everett-Allen, head of international research at Knight Frank, the changes are less unfavourable than was initially anticipated. ‘This has been met with relief by some purchasers who had braced themselves for tougher regulations. At €1.3 million, France’s wealth tax threshold is now higher than it was in the buoyant times of the mid-2000s and while Capital Gains Tax (CGT) has increased, its impact is mitigated to some extent where a double taxation treaty exists with the purchaser’s home country,’ she explained.
When considering the increase in CGT some buyers are assessing it against the lifecycle of their potential new home. ‘Many plan to retain their home for a minimum of five to 10 years and therefore take the view that a new government may be in place and the current tax structure will be redundant by the time they choose to sell,’ said Everett-Allen.
The report also shows that France’s prime market continues to attract new, and retain existing demand. Northern Europeans are currently the most active in the market but the number of nationalities searching for prime property in France has increased. In 2010 web users from 133 countries searched for a property in France, in 2012 this figure rose to 178, an increase of 28%.
During 2012 the strength of the euro had little further influence on the volume of buyer enquiries since many had already factored this into their assessment of the market. However, Everett-Allen points out that a notable change in the relative strength of the euro may create the possibility for change in 2013.
As the most visited country in the world France retains its rating as one of the most desirable second home destinations globally. The recent global economic turmoil has not halted wealth creation. According to Knight Frank’s Wealth Report 2013 Europe produced 36 new billionaires between 2011 and 2012. The number of Europeans with assets of US$30 million plus is also set to rise, increasing by 16,700 or 31% in the next decade.
‘Some will be looking for a slice of Europe’s limited pool of prime real estate. France, we estimate, will continue to feature heavily in their property portfolios,’ concluded Everett-Allen.
This article was republished with permission from Property Wire.