Many homeowners still ‘better off’ with France's new local tax system

This is despite significant rises to one tax. We also look at changes to eco-friendly grants in France and prices in Paris in our weekly roundup of property articles

Our round up of this week’s property stories
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1: Many homeowners still ‘much better off’ despite significant rises to one local property tax

Many homeowners in France will still pay less in local property tax overall in 2023 than in many previous years, even with the recent rises to the taxe foncière, it is claimed.

This is due to the ending of the taxe d’habitation on main homes.

The removal of the taxe d’habitation on all but second homes caused the overall amount of property taxes paid by most homeowners to drop – and this still holds despite the sharp increase intaxe foncière rates in many communes in 2023.

Last year – 2022 – was the final year in which taxe d’habitation was payable on a main home, and even then, it was only the wealthiest who did so.

The French financial media Les Echos claims the savings work out on average at around €720 each for the 24 million or so homeowners who no longer pay the tax, or around €18billion less tax overall.

The government has stated that there is no link between the rises in taxe foncière in 2023 and the abolition of the taxe d'habitation for main homes.

“The taxe d'habitation has been compensated to the nearest euro for communes, with a grant that has exactly the same purpose as the taxe d'habitation," said the Assemblée nationale's spokesman for budgetary issues, Jean-René Cazeneuve.

Both taxes are sources of funding for local councils, which can partially set their own rates for them, thus making them one of the few revenue streams they can control.

The taxes are both based on 'VLC' theoretical rental values allocated to people's properties, which were subject to an across-the-board increase of 7.1% this year due to a national formula linked to the consumer price index.

However, communes could – and many did – also add to this by raising their own percentage rates, which are applied to the VLCs to calculate the tax.

Many communes where second-home ownership is low have claimed that the government compensation for the drop in funding has been insufficient, with some saying that a rise in taxe foncière had been needed to cover the provision of services.

The mayor of Metz said taxe foncière rises were “the only way to balance the budget” after the loss of taxe d’habitation revenue.

Read more:Taxe foncière explainer: Who pays and the exemptions

Read more: Which renovation works can exempt you from property tax in France?

2: MaPrimeRénov’ applicants now need to use professional advisor

Many people benefitting from the MaPrimeRénov' government aid scheme, which provides subsidies for eco-friendly home renovations, must now hire a mandatory advisor as part of the application process to receive aid.

Homeowners who are asking for a grant of more than €10,000 for at least two kinds of work must see a so-called ‘Mon Accompagnateur Rénov’ (MAR) professional to discuss their project.

These advisors can be appointed by the government or by local authorities and you can speak to one of the local France Rénov' centres to obtain their help.

People who do not discuss their project with one of these professionals will not be able to apply for funds.

The MAR professional will visit your home, providing an assessment of your project and housing situation, as well as an energy audit of the property.

Further help will include recommendations on exact changes to make to the property during the project, cost assessments, and advice on with which approved firms to work.

They will also provide help with your MaPrimeRénov’ application, as well as help find specific funding avenues, whether or not you are deemed a low-income household.

They will also be on hand during the project to help with any urgent queries, and offer support once the project has been completed.

This rule has already been in place for projects over €5,000 using the Ma Prime Rénov Sérénité scheme since January 2023. This is for low-income owner-occupiers who want to undertake an overall energy renovation of their home.

While you will have to pay the MAR for their time, the ANAH (Agence nationale de l'habitat) will offer grants of up to €875 – depending on the work and level of household income – towards the cost.

From 2024, ANAH will cover up to 100% of MAR costs for the most low-income households.

By 2025, there are plans for up to 5,000 MARs to be in place across France.

Read more: Tips to avoid energy renovation scams in France after warning issued

3: Rental market shrinks, demand soars

Estate agencies are struggling to provide enough properties for rent and demand is increasing.

The number of properties on the rental market has dropped by more than a third (34%) in the last 12 months, a study by the large estate agents' federation Fnaim shows.

This is despite demand for rental properties increasing by 23% across the country.

Around half of all estate agencies in the country have fewer than 10 properties available to rent at any given time, with 10% not having any.

In the Paca region (Provence-Alpes-Côte d’Azur) of southern France; 88% of agencies have fewer than 10 properties to rent despite demand almost doubling.

Paca has seen the sharpest fall in rental supply – 43% in 12 months – and Paris has also seen a 40% fall compared to this time last year.

Occitanie (37%) Île-de-France (32%), and Normandy / Auvergne-Rhône-Alpes (29%) have also seen sharp drops in supply levels.

“For several years now landlords, who have been badly treated by the public authorities, have had to deal with a never-ending stream of constraints,” said president of Fnaim Loïc Cantin.

Rent controls, rental permits, compulsory energy renovations, and skyrocketing property taxes are some of the constraints he highlighted.

“For the past 18 months, the economic equilibrium of rental investment has been disrupted all the more, as inflation and rising energy costs have spared no one,” he added.

In light of this, many landlords are looking to sell their rental properties, which they see as time consuming or as not providing enough return – especially if old and set to be heavily affected by upcoming energy regulations.

As with the fall in supply, demand is also heavily influenced by region.

Demand in Paca increased by 42% – the highest in the country – followed by Paris (36%) and Nouvelle-Aquitaine (28%).

This is due in part to an increase in those unable to access a mortgage (both due to high interest levels and banks’ reluctance to lend), forcing them to continue renting where previously they would have bought.

Read more: Rent controls coming in for Pays-Basque

4: Paris property prices fall below €10,000 per m²

The long-touted fall of average property prices in the capital to below €10,000 per m² has finally happened.

Prices have fallen below this for the first time since June 2019, according to a report published by Meilleurs Agents this month.

The report adds that in 17 of Paris' 20 arrondissements, prices are falling – only the 6th, 4th, and 8th have seen year-on-year price rises, at low rates of 2.3%, 1.1%, and 1% respectively.

This fall has been expected for a while, with various reports from estate agent companies claiming the threshold had already been passed earlier this year.

France’s notaires, who release an official quarterly report on the property market, still believe that the threshold will not be reached until winter of this year, but they compile their data on a three-month lag, so their results for the third quarter of this year will not be available until 2024.

Average prices in the capital had never passed €10,000 per m² before 2019, but the ever-rising prices were a sign to many of a strong property market. To see it fall under this amount again suggests that the market is undergoing an extensive slump.

At their overall highest (August 2020), the price per m² was €10,764.

Even during the 2008 financial crisis, prices only fell by 7.3% before rising again, reaching a new record high soon after.

Although prices have stabilised sporadically since 2020, there has been a general downward trend, with prices not reaching the high of August 2020 since.

The three worst-performing arrondissements in terms of prices were the 13th (where prices have fallen 7.1%), the 10th (6.8%) and the 15th (6.4%).

Meilleurs Agents rates Paris as the fourth-worst performing French city for house prices in the last 12 months, recording an overall reduction of 4.5%.

Only Nantes (5.2%), Lyon (8.1%) and Bordeaux (8.2%) have recorded larger falls.

Read more: See how property prices have changed in your corner of France

5: Judges must now verify compensation levels for faulty building work

If a new-build property has major defects and the homeowner demands compensation from the builders equivalent to the cost of rebuilding it, judges must verify that this is not an "unreasonable" request in view of the nature of the defects.

Previously such checks were only required where a homeowner was demanding that firms actual rebuild their house, not where financial compensation was demanded instead. Now it will apply in both scenarios due to a recent ruling by the Court of Cassation, France’s highest civil appeal court.

In a recent court case in Rennes a carpenter and architect challenged a ruling that they had to pay the equivalent of the cost of demolishing and rebuilding a detached house that they had built.

Both the architect and carpenter had made mistakes, leaving the roof around 25cms lower than it should have been.

The homeowner said that the contract signed with the workers meant they could not be forced to redo the work, but they were liable to pay for the costs of any errors being rectified.

According to previous case law, in such cases - where rebuilding is not being demanded - the judge does not run checks on whether compensation is in proportion to the defects, however the Cour de cassation said this was not the correct approach.

For future cases judges will check to see that the compensation demanded does not result in an unfair profit or loss for either party, and whether or not it is reasonable to expect the homeowner to live with the property in its present state.