PRESIDENT Hollande is to reduce the effect of capital gains tax on second home sales in a move to boost the property market.
Speaking against a background of falling property sales – down 12% to 709,000 transactions in 2012 and heading for another fall of 8.5% to reach 600,000 this year – he said the previous Fillon government had made “a mistake” in increasing the limit for full CGT exemption from 15 years as a secondary property owner to 30 years on February 1, 2012.
Heavy CGT liabilities were blamed alongside the slump for the property slowdown and he said he would set a new limit of 22 years, that could be applicable form September 1 this year. He will also introduce an exceptional allowance for 2014 on second homes or property for rent.
Property sales are likely to stagnate in advance of the September date for the change and estate agents’ federation Fnaim said sales had been dropping for two years, apart from a surge in January 2012 in advance of the Fillon changes.
Capital gains tax and social charges can take 34.5% of the gain on a secondary property and the situation has been worsened by the government’s move to apply a new tax from January 1 this year on gains of more than €50,000 – which could mean the total “grab” could be 40.5%.
From September 1, secondary home-owners will get complete exemption from CGT after 22 years of ownership of the property.
In another move to get the property market moving Hollande said he would increase pressure on the owners of building land to use it or face increased tax penalties.
The government will introduce measures in the 2014 finance bill to get rid of the time limit that gives owners of building land some exemption from CGT. Hollande said “it will be more penalising to hold on to building land than to sell it”.