Macron’s pledges to reform wealth tax have boosted prices in the French capital
The election of President Emmanuel Macron appears to be waking up Paris’s prime property market. Prices, which saw a steady 14 per cent slide in the five years to the middle of 2016, have turned a corner. Average prime home sale prices in the capital gained 9 per cent in the three months to June 2017, compared with the same period a year earlier, according to Knight Frank.
Domestic buyers are driving the rebound at the top end, agents report. Spying huge discounts in the neighbourhoods worst hit by market falls, they have started to pounce. The most striking example is the 16th arrondissement, an area that has traditionally attracted affluent French families to its large lateral Haussmann-designed apartment buildings.
“The best apartments dropped from €17,000 per sq metre at their peak to €12,000 a year or so ago. Many domestic buyers saw this as too good an opportunity to miss,” says Roddy Aris of Knight Frank’s French team. Despite the recent gains, plenty are still attractively priced, including a three-bedroom apartment near La Muette metro station, in the 16th, for sale with Savills for €1.59m.
International buyers favour the sixth and seventh arrondissements — trophy locations around the Rive Gauche and Latin Quarter, beloved of famous writers, philosophers and artists, stretching west to Invalides and the Eiffel Tower.
In these spots, demand for the best addresses held up even when prices were dropping elsewhere, says Tim Swannie, director of Home Hunts, a high-end buying agent with an office in Paris.
“Middle Eastern buyers, in particular, remained interested. Now with all the press generated from the Macron victory, we are seeing more inquiries from the US and China.” Most fall in love with these areas as visitors, he says — they contain many of the city’s top hotels. “Typically, when they buy, they want a view of the Eiffel Tower or the Seine and easy reach of the shopping on the Champs-Elysées.”
In the seventh arrondissement, Savills is selling a one-bedroom flat for €1.09m. For bigger spenders there is plenty of interest in the same neighbourhood. Knight Frank is selling a three-bedroom apartment on the Boulevard Saint-Germain for €8.5m.
The president’s pledge to reform the country’s unpopular wealth tax should bolster the appeal of Paris’s top-end neighbourhoods further. The annual tax currently applies to all households where worldwide taxable wealth — from homes and smart cars to investments and jewellery — exceeds €1.3m. Macron’s plan is to limit it to property, exempting assets — such as savings and investment — which, he believes, contribute to France’s economy.
The wealth tax was not the only thing making Paris a hard proposition to swallow for top-end property buyers. François Hollande, Macron’s predecessor, signalled his intentions during his election campaign in 2012, notably with a 75 per cent super tax on incomes above €1m.
The tax was fraught with legal problems — despite Hollande’s election in May 2012, it was not passed until the end of 2013 — and was quietly abandoned at the beginning of 2015. This was too late for many of Paris’s wealthiest, who, led by French actor Gérard Depardieu, had decamped to Switzerland, London or — in the case of Depardieu — Russia. (The actor’s move did at least free up one of the area’s plusher homes in Bougival, to the west of Paris. In early September, this was reportedly occupied by Brazilian footballer Neymar for €14,000 per month in rent, following his near-quarter of a billion dollar move to Paris Saint-Germain.)
Government tax collection figures quoted by French newspaper Les Echos showed a 46 per cent increase in those earning above €300,000 leaving the country in 2013.
The exodus left an oversupply of top-end homes that is still waiting to be cleared. Despite the recent price gains, Paris’s smartest spots still represent a huge discount on equivalent London prices. Average sale prices in the second quarter of this year in prime central London were equivalent to €30,485 per sq metre, according to Knight Frank. In Paris, the average prime sale was €17,461.
- For foreign tax residents, the wealth tax begins when worldwide assets breach €1.3m in value
- For a €1.3m property, the annual rate under the wealth tax is €25,000. The marginal rate then increases, in several steps, up to 1.5 per cent for homes worth more than €10m
- The Eurostar connects Paris with London in 2hrs 15m. Direct flights connect Paris to New York in 8 hours, 30 minutes
What you can buy for . . .
- €1m A two-bedroom apartment on Rue de Seine, sixth arrondissement
- €3.25m A large lateral four-bedroom Haussmann apartment near Bois de Boulogne, 16th arrondissement
- €6m A large four-bedroom apartment with a balcony on the Rue Constantine, seventh arrondissement