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France to slap hefty tax hike on holiday homes

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France to slap hefty tax hike on holiday homes
Second homes in France are set to be hit by a major tax hike. Photo: Vic Burton/Flickr
15:00 CET+01:00
Second home owners in France, including foreigners who own holiday homes, are set to be hit by a 20 per cent rise in the tax on their properties, it was revealed this week.

Owning a house in Paris, the French countryside or on the coast is a dream for many but it could soon become a little more costly to fulfil.

Tax on second homes in France could rise by 20 per cent, under new government plans to increase it in areas where housing is in short supply and prices are high, financial newspaper Les Echos reported on Tuesday.

The 20 per cent surcharge on the existing property tax - known as "taxe d'habitation" - for second homes would be applied to 30 zones across the country including Lyon, Marseille, Bordeaux, the Mediterranean and Atlantic coasts and Paris – where one in six apartments is believed to be a second home.

It is believed it would only apply to unoccupied homes, which have not been rented out.

The proposal is part of the government's supplementary budget for 2014 and it is estimated that it could bring in €150 million to those communes that apply it.

The French government claims it would also increase the availability of property to let by encouraging owners of second homes to rent them out when not in use rather than leave them empty.

The tax would also be used to raise funds for the affected communities, which would decide themselves whether to introduce the new levy. It would come into force on January 1st 2015.

Those involved in the property market have predictably reacted angrily to the proposal.

Jean Perrin, president of the National Union of Property Owners, said that real estate in France had become “a lamb to the slaughter”.

“It’s a new craze of this government to tax property," he said. "It is a mistake because it will increase the cost of real estate and punish owners who have worked hard to have a second home and make such an investment. Then they (the government) lie and say that this is to free up housing but that’s a fundamental error.”

Perrin said the “real reason” is to give money to communities, but added “It shouldn’t be a case of just transferring the load and saying ‘we’re going to save money’.”

Jean-François Buet, the president of FNAIM, France’s real estate federation also expressed his incomprehension.

“The market is already moribund and we are in the process of finishing it off,” he said. “What are they thinking? That those with second homes are going to sell their properties to avoid the taxes?

“No, they will just wait for the next elections, that’s all.  They can’t just govern by raising taxes,” Buet said.

Bernard Cadeau, the president of the ORPI group of estate agents said: “This is not how we will bring back confidence, which is the essential ingredient for the return of investment.

“What we need is a tax system that serves the economy, not the other way round.”

by Lindsey Johnstone

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