19th March 2014
A property advisory firm says prime property investors may choose Paris rather than London following the Budget’s capital gains tax shake up for foreign property investors. Today’s Budget revealed that from April 2015 foreign property investors will now have to pay capital gains tax (CGT) on UK properties which are not considered their main residence. Athena Advisors say such a move could see more foreign investors choose prime markets across France, instead of those in central London.
Nicholas Leach, partner at Athena Advisors says: “This move is likely to make many investors look south of the channel, which is ironic really as France has normally been Europe’s whipping boy when it comes to property tax. From a CGT perspective, France could now become a better option for investors as unlike the UK, French CGT has a taper relief system which reduces exposure the longer you own the property.”
In the UK, CGT on the sale of second homes ranges from 18% to 28% depending on the owner’s tax band and from April 2015 non-resident owners will be exposed to this tax. In France, the picture is very different with a flat CGT rate of 19%. As of 1st reduced from 30 years to 22 years for any capital gains made since 17th August 2012. A new taper relief system for the 22 year period was also put into effect.
“Foreign investors with short term views are likely to stick with London, but those long term plans may switch targets to Paris,” adds Leach. “Under French CGT rules, if you’ve owned a property for 15 years the 19% CGT is reduced by 60%, which represents a huge reduction in exposure. Even with the addition of any social charges, France still remains favourable as social charges also have a taper relief system in place. From a French perspective the timing of this announcement couldn’t be better.
“Prices are soft in prime residential locations and commercial property prices are also competitive. Combine this with cheap lending and you have a market which is very attractive to international investors.”