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What does the Election of Emmanuel Macron mean for Paris Real Estate?
France and its allies breathed a sigh of relief as Emmanuel Macron defeated Marine Le Pen in the presidential election second round face-off. France now has a young, internationalist, pro-business president who hopes to usher in a new era for the country. What does his election mean for Paris real estate?
Potential disaster averted
Firstly, his election has avoided the jump in French bond yields which would have occurred had Le Pen won the vote. Such a jump filters down to mortgage borrowing costs (the OAT yield Obligations assimilables du Trésor or French T-Bill) virtually doubled overnight when Trump was elected) and would have hurt the market’s current recovery through decreased demand for mortgages. Rates will remain low thanks to a restored confidence in the French economy’s long-term prospects.
The Euro also hit a six-month high against the dollar thanks to his victory. The immediate effect of this is a jump in the value of Paris real estate internationally.
And what of the long-term? The scenario of rates remaining low this year (below 2% on average) has been all but cemented thanks to his victory, great news for the value of real estate in Paris which will continue its growth thanks to high demand.
Macron and property
Then there are his policies. When it comes to property, two stand out as important. He wishes to exempt 80% of households from the taxe d’habitation, knocking a third off it each year from 2018 to 2020. Macron also wishes to reform the wealth tax (ISF), removing the wealth tax from most assets in an effort to free them up for investment, but keeping the current wealth tax on property over 1.3M € – not great news for those with high-value properties in Paris and France.
To know which of his policies he will be able to implement we need to wait until the legislative election in mid-June. He will need to form a government in the national assembly, which will probably involve making a deal with either the Socialists or the Republicans (unless he can win a majority with his En Marche! party, which is unlikely).
All in all, the election has proved good news for Paris real estate in 2017. April’s property figures from market sources show accelerated growth in the capital, while the latest Notaire figures – which cover the three months ending March 1 – confirm this. A cynic could pass this off as a last-minute pre-election frenzy, but low rates and the first ever neoliberal president mean this is an unprecedented period which is sure to break the trend of previous election years.
The Notaires anticipate – and market experts confirm – that the Paris record per m2 has been broken already. Growth in the capital during April was 0.4%, while growth for the year by the end of this month is already at between 5% and 6%. Transactions in the capital fell slightly month-to-month but this was due to sellers holding out for the election result. May could see a jump in activity with a slow in the upward price movement.
image © Wikicommons
sources: Les Fuerts, CNBC, Meilleursagents, SeLoger