How Do Paris Real Estate Fees and Taxes Compare to Other Major Markets?
Purchase taxes on Paris apartments often give buyers pause; but how does Paris really stack up to other major real estate markets?
Buying an apartment in Paris is unfamiliar territory for many international investors. In addition to language barriers and complex closing procedures, one question looms when buyers calculate their purchase budget: in France, “notaire fees” on real estate amount to of 7-7.5% of the purchase price. This breaks down roughly into:
- 5.5% stamp duties (purchase taxes)
- 0.5% document research costs (to ensure good title to the property), and
- 1% fee to the notaire for overseeing the process
Such high taxes and closing costs certainly discourage the idea of flipping property, since an investor is down 7% (and an additional 5% if the property was sold by a real estate agent) from the date of close.
But Paris is not alone in assessing stamp duties on property; in fact, Paris ranks 5th in closing costs as compared with 9 other major international real estate investment markets.
“Particularly for American buyers, these closing costs can seem exorbitant.” says Kathryn Brown, client services director at Paris Property Group. But a closer look reveals that, over time, it’s not a bad deal. “While the initial hit can feel important, it more than balances out over time,” she explains. This is because “annual property taxes for Paris apartments are some of the lowest in the world. Paris property owners pay between .1 and .3% a year in property tax – substantially lower than annual property taxes in most cities in the United States.” Here are some US cities to compare:
|Los Angeles, CA||0.61%|
|New York, NY||0.77%|
|San Francisco, CA||1.14%|
|Bridgeport, CT||4.55 %|
The amount of annual property tax in Paris (taxe fonciere) doesn’t distinguish between owner-occupied or rented properties for purposes of calculating annual property taxes. This is in stark contrast to other cities, like Singapore for example, where a 4% annual property tax jumps to 10% if the owner doesn’t reside at the property.
While this is good news for non-resident investors in Paris, for luxury property owners there is still France’s “solidarity wealth tax” to contend with. Under France’s recently revised wealth tax, non-resident owners with properties valued above 1.3 million will pay an additional 0.25% tax per annum for the value up to 3 million (or from 3,250 euros up to 7,500 euros), and 0.5% on the net value above €3million. A mortgage on the property can reduce the “value” of the property for wealth tax purposes, thus reducing or eliminating this additional tax. Even with this additional tax on larger properties, Paris annual property taxes remain well below 1% per year – especially when you consider that property taxes are often much higher.
Some sample annual property tax rates:
- Montreal 1.49%
- Singapore 4%
- Moscow 2.2%
So even if paying nearly 7% in closing costs to buy an apartment in Paris can feel like a big hit to the interested buyer, take this to heart: that upfront fee is quickly absorbed in subsequent years and ultimately it helps keep speculators from “flipping” properties – keeping the Paris real estate market from developing “bubbles” like other markets. And, in the end, it’s a small price to pay to be a member of the fortunate few who own real estate in Paris.