Denys Laroche has been trying to sell his 18th century one-bedroom apartment just off the Champs-Elysees for six months. If the 3.75 million-euro ($4.2 million) Paris home doesn’t attract a buyer soon, he may decide to wait for a new president next year.
"We have a socialist president who’s increased taxes," said Laroche, a business owner who’s about to retire and wants to spend more time at his country home. Candidates vying to replace Francois Hollande in the 2017 presidential election will probably ease taxes on the wealthy, he says. "If the election goes well, it’s going to be better for real estate."
France’s improving economy has sparked a modest recovery in the market for cheaper Paris homes, following a slump that started in 2011. However, luxury properties are still losing value. Elite homeowners such as Laroche blame Hollande -- who took office in 2012 with a mandate to tax the rich and curtail corporate tax breaks -- and are pinning their hopes on a widely expected change of government.
Homes priced at more than 2 million euros have dropped 3.7 percent in the six months through March, while the wider Paris market has gained 2.6 percent, according to data compiled by Databiens. Since the peak in 2011, luxury homes have lost about 12 percent.
A high-end apartment in Paris now costs about 12,650 euros per square meter, compared with London’s 24,500 euros per square meter, Databiens estimates. Demand for luxury homes in the U.K. capital has also been hurt by an increased tax burden for overseas buyers and wealthy landlords.
In Manhattan, a luxury-condo boom is fizzling as inventory increases and demand from global investors diminishes. In the first two months of this year, 150 contracts were signed for homes priced at $4 million or more, according to a report by Olshan Realty Inc. That compares with 214 in the same period of last year.
Wealth Tax
Real estate investors’ biggest complaint about Hollande is a wealth tax that has been around since the 1980s, and which the Socialist-Party politician raised after taking office. Formally called the Solidarity Tax on Wealth, the levy requires anyone with more than 1.3 million euros of assets in France to pay between 0.5 percent and 1.5 percent to the state every year.
"The wealth tax is an issue especially for wealthy families who invest in high-value properties in France," said Philippe Fernandes, a tax lawyer at EY in Paris. In addition to deterring foreigners who might otherwise invest in France, high levies also discourage local people from buying expensive properties because real estate is an easier asset for authorities to value and tax.
Before becoming president, Hollande advocated a 75 percent tax on individuals making more than 1 million euros. He ended up amending the plan to tax companies on salaries above that level. In 2014 he reversed course, introducing corporate tax cuts that were meant to stimulate the economy, and promised not to raise taxes again.