_What does Macron's victory mean for France's prime residential markets?

Macron’s victory in yesterday's French presidential election marks a new chapter in French politics ending decades during which the Socialists and Republican parties have dominated French politics. Le Pen's victory would no doubt have prompted a degree of capital flight from the country as ultra-high-net-worth individuals (UHNWIs) reassessed their residency, but what do we know of Macron and his plans for France's housing market? We asked Mark Harvey, Head of our French Residential team, for his views on Macron’s victory and what it means for France’s prime residential market.

Kate Everett-Allen May 08, 2017

Perhaps the top question amongst second home owners in France and those looking to buy, relates to the country’s Wealth Tax, is it likely we will see any changes?

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.

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. Residents may also see an improved tax landscape in the medium term.

With more policymakers around the world looking to control the level of inward investment either to generate revenue or to control affordability, do you think we are likely to see greater regulation in Paris or across France?

Whilst the debate on affordability and availability in Paris and its metropolis is set to continue it is difficult to see how cooling measures and taxes can resolve the underlying issue, namely a dramatic shortage of homes.

Whilst Macron may initially be tempted to target “empty” or foreign homes in Paris it is clear the measures introduced so far by both City and State have backfired and fall short of addressing the actual physical shortage.

More tellingly, during the course of his campaign Macron has repeatedly pledged his support to the construction industry and promised a reduction in bureaucracy and government intervention.

Is it likely we will see changes to Capital Gains Tax or rental legislation for holiday homes?

Macron has promised to review property taxes generally and whilst he has promised the removal of the Tax d’Habitation we are not expecting any dramatic changes to be made. On the contrary, Macron wishes to “stabilise” the property market and “simplify” the raft of legislation currently in place.

Capital Gains Tax on French property was originally devised to encourage long-term ownership and discourage short-term speculation. It functions on a Taper Relief basis progressively reducing over 22 years to 0%. 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.

Macron wants to boost the French economy by cutting public sector jobs and reducing taxes, presumably a strong economy is good news for the wider property market including the second homes sector?

Macron’s policies are “business friendly”, he is pro-globalisation and pro-Europe. He understands the absolute need for reform and the importance of stability and attracting foreign investment. 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.

In light of Macron’s victory, what’s your outlook for the French prime residential market during the remainder of 2017?

The market has shown some very encouraging signs in the past 12 to 18 months with activity continuing to accelerate into 2017 and this was despite the French election campaign.

Paris, Provence, the Cote d’Azur and the Alps in particular have seen four times the level of enquiries when compared to three years ago. Whilst on one hand British demand is likely to slow over the coming year international demand on the other hand looks very bullish due to a powerful combination of softer prices, a strong US dollar, improved economic activity, record low interest rates and now a new President. With prices recovering the new momentum is most definitely “En marche!”

For more information read our France Inside View or view our analysis on house prices rankings by French President.