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Inside the Market / Market Trends

Sales of new-build property on the rise in France

Construction site

In more good news for the real estate sector, sales of new-build properties have been soaring since the beginning of the year.

The French real estate market, struggling since the 2008 crisis, is on the mend. An increase of 19.3% in sales of new property was recorded in the first quarter of 2015, with real estate professionals believing this trend is set to continue into next year.

Over 30,000 new housing constructions were reserved by private investors in that period, according to figures released on August 27th by the Federation of Property Developers (FPI). The market is dominated by investors looking to rent out their properties for profit. For this reason, individual homes are selling at a much slower rate than studios, which are primarily bought by investors.

A house or apartment qualifies as new property if it has been constructed in the last five years, and has not previously been inhabited or occupied for any purpose. The property must also have been the object of only one purchase/sale transaction. When all these criteria are met, the owner of the property benefits from certain tax advantages. Moreover notaire fees for transactions involving new property go down to 3% instead of the up to 8% for existing properties.

The recovery in the new property sector is mainly due to investors buying homes to rent out. Their renewed interest in the market stems from low interest rates on loans as well as from the Pinel tax program — named after Housing Minister Sylvia Pinel — which affords rental investors new fiscal advantages. Tax reductions are given to investors renting their property for over six years, with increasing rebates — ranging from 12 to 21% — applying to 6, 9 and 12 year rental periods.

Alexandra François-Cuxac, president of the French Real Estate Developers Federation (FPI), believes that the government should do more to encourage developers to build “affordable housing, including accommodation for low-income households” in order to boost home ownership.” The FPI plans to publish “a book of concrete proposals” on the subject in November.

The FPI also calls on the government to take action to prevent unnecessary construction delays, by “alleviating obstacles” that slow down the process. “The cycle of housing production in France has risen from 4 to 6 years”

Martin Bouygues, CEO of the Bouygues Group, says that the boost in new property sales realized this year will not translate to increased construction until mid-2016 at least, as “it takes a year minimum between sales transactions and construction sites opening.”

Photo credit: Flickr / Bakoko

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