The French real estate market is on the verge of significant changes with the draft finance law for 2025. Proposed reforms target tax advantages that have previously facilitated investment benefits.

Reforms of the Capital Gains Taxation

The first highlight of the draft law concerns the end of exemptions for the duration of ownership. Currently, property owners benefit from significant tax exemptions on capital gains made after 22 years, with a total exemption from social contributions after 30 years. However, under the new proposals, an indexation of the purchase price based on inflation might be introduced. This could change long-term investment strategies. The draft also suggests applying a flat tax rate on capital gains, potentially increasing from 30% to 33%.

Changes to the Exemption on Primary Residence

Another important aspect is the adjustment of conditions for capital gains tax exemption on the sale of a primary residence. Now, this exemption will require a minimum of five years of actual residence. The change aims to limit abuse and encourage residential stability. However, exceptions are available for specific situations such as job relocations, separations, or hospitalization.

Potential Consequences of the Reforms

The proposed reforms might significantly alter investment strategies of property owners. While there are concerns that the new conditions might reduce the attractiveness of real estate investments, they may simultaneously stimulate the market by increasing housing supply. Debates on this draft are just beginning, and the impact on the French real estate market will gradually become apparent as the reforms take effect.

The proposed tax reforms aim to simplify the tax system and revive the real estate market. However, they may significantly alter the strategies of property owners by reducing traditional tax advantages associated with long-term ownership.