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Price rises: catching up. And tomorrow ?

05.02.2017

The buoyant market in 2016 and the beginning of 2017 as shown by the higher volume of transactions may have a twofold effect: that of seeing fewer potential buyers who will have found what they were looking for, but also that of reducing the supply of properties for sale. The combination of these two phenomena may have the advantage of sustaining prices by virtue of the rules in economics whereby prices reflect a balance between supply and demand. That being the case, this would be a good time for buyers to buy and for vendors to sell. In that respect, a harmonization of capital gains and social security taxes with the cut-off for exemption being reduced to 15 years, as the Notaires de France has suggested to candidates running in the presidential election, would see a return to vacant properties on the market and would also curb the rise in prices, if indeed it continues. The market could then settle down and reduce the pressure on prices.

Furthermore, as pointed out earlier, a pre-election wait-and-see policy can definitely be ruled out. What is to be feared is a disproportionate increase in interest rates, which would curb the financial capacity to buy and would unsettle the current balance. This scenario could come to pass if France were to exit the EU and the single currency.

An abandonment of effective tax measures (interest-free loans, Pinel) could also unsettle a market in which buyers, first-time buyers in particular, have found an additional reason for investing in bricks and mortar.

A rebalancing of relations between landlords and tenants is also to be desired, in that the latest laws protecting tenants are discouraging the French from investing in buy-to-let properties. Indeed, the tax loss following the abolition (even in part) of the “taxe d’habitation” (French council tax paid by occupants) may be offset by other taxes levied for local authorities and, why not, an increase in the “impôt foncier” (French property tax), thereby accentuating this imbalance. Soon only local councils will be able to invest in the rental market through social housing providers, and the lack of private investors could lead to a shortage of rental properties, which would ultimately be detrimental to tenants. 

Namely

Discover the interative PDF of the French property market report N°35 - April 2017

See also
congres_notaires_europe_cnue_2017
22.09.2017
4th Congress of the Notaires of Europe
02.10.2017
Conseil du coin : meet a french notaire to a cafe !
13.11.2017
French property market report / N°37