French property prices rise for the fifth consecutive quarter in a row

Residential property prices in France, particularly in popular locations, are continuing to rise steadily, the latest report from the FNAIM shows.

Prices have risen for the fifth consecutive quarter in a row, up an average of 3.3% over the previous quarter with a stronger rise of 4.3% in properties outside of Paris.

It means that the average price of a property sold by FNAIM estate agents has now risen by 6.8% so far this year. But in its bulletin the FNAIM is cautious over the outlook for the rest of the year. 'Prices should become more stable and even fall by the end of the year,’ it says.

Agents are urging buyers and sellers not to get too excited by the price increases. ‘Further headlines of house price rises need to be treated with caution. It is important that vendor’s expectation levels remain realistic. Sensible pricing will mean that transaction levels remain consistent and both buyers and sellers will benefit,’ said Trevor Leggett, chief executive of Leggett Immobilier.

The company confirmed that it is seeing an increase in enquiry levels from both local and international buyers, particularly at the top end of the market.

The French Government is currently overseeing some radical tax changes to French property ownership. Leggett believes that changes such as the new wealth tax and capital gains tax adjustments will make France a more attractive location for international buyers.

He pointed out that the new wealth tax rules coming into place are making France one of the most attractive destinations in Europe, as the threshold for this tax (ISF) is increasing from €800,000 to €1.3 million. Households with assets of between €1.3 million and €3 million will be subject to a tax of 0.25% and for assets over €3 million the tax will be 0.5%.

Changes to CGT will benefit those existing French property owners who wish to benefit from the old regime, according to John Busby, director of French Private Finance. ‘I expect there to be an increase in supply over the next few months as French based owners look to cash in their asset before the tax increase in Feb,’ he said.

‘It is worth pointing out the UK based and other international investors will only pay 19% on any gains under the new regime and not the 32% payable by French resident owners. Overall the situation has not changed much for would be owners of French property as any gains in France are still liable for UK CGT,’ he added.