What does Emmanuel Macron’s Election Mean for French Property?
With Emmanuel Macron elected president, France enters a new era. One of free-market economics and a smaller state? One that is good for the French property market?
In a largely expected result, Emmanuel Macron defeated Marine Le Pen with almost double her vote share. Europe has breathed a huge sigh of relief as the nationalist wave sweeping the western world was again halted. While the next five years offer up a lot of possibilities, it is worth considering the short to medium term outlook for French property in the wake of this election.
Early indicators look good
The election had an immediate effect on property markets in Europe and France, though in the week since things have balanced out. The Euro surged in value against the dollar. This had the effect of increasing the value of French real estate internationally.
The OAT Average – France’s bond yield – also fell slightly. This will not necessarily affect the market significantly but a Le Pen victory would have seen a sharp jump, just as was seen with Trump in November. This would have filtered down to mortgage rates, possibly hurting demand for property and therefore prices with it. Potential disaster avoided, then.
The third piece of immediate good news for French property in the wake of Macron’s election was the stock market. The property sector indices in European stock markets gained 1.56% the day after the vote delivered France’s youngest ever president. But like the Euro, markets soon adjusted back to recent, normal levels.
What his program means
His program is also significant. His standout features regarding property are an exoneration of the taxe d’habitation for 80% of the country – phased in from 2018 to 2020 – but an increase in taxes on property wealth above a million euros as part of a reform of the wealth tax. UNPI believe this will involve increasing the taxe fonciere. So for those with property in France already, he is a mixed bag.
However, on the economy, his policies are positive for French property’s long-term prospects. He wishes to reduce corporation tax, taxes on capital gains and investment income, as well as liberalize the economy, all of which will help spur the economy and attract foreign investment. A buoyant economy will help to maintain the current French property market recovery, which is largely thanks to very cheap mortgage credit.
To put his program into place, he will need to broker a deal with whichever party or coalition has a majority in the senate, which will be decided in June’s legislative elections. Polls are predicting the Republicans will gain the most seats, and so expect him to install a prime minister from the party. What he might have to give up from his campaign promises remains to be seen.
image © Wikicommons