A flood of top-end properties are hitting the market as businesspeople seek to leave France before stiff tax hikes hit, real estate agents and financial advisers say.
“It’s nearly a general panic. Some 400 to 500 residences worth more than 1 million euros [US$1.3 million] have come onto the Paris market,” said managers at Daniel Feau, a real-estate broker that specializes in high-end property.
While it is not yet on the scale of the exodus of rich French after the election of Socialist former president Francois Mitterrand in 1981, real estate agents said, the tax plans of France’s new Socialist President Francois Hollande are having a noticeable effect.
While the Socialists’ plan to raise the tax rate to 75 percent on income above 1 million euros per year has generated the most headlines, a sharp increase in taxes on capital gains from the sales of stock and company stakes is pushing most people to leave, according Didier Bugeon, head of the wealth manager Equance.
French entrepreneurs have complained vociferously against a proposal in the Socialist’s budget for next year to increase the capital gains tax on sales of company stakes, which they argue will kill the market for innovative start-up companies in France.
Entrepreneurs in the high-tech sector in particular often invest their own money and take low salaries in the hope they can later sell the company for a large sum.
They say a stiff increase in capital gains tax would remove incentives to do this in France. They also argue that capital has already been taxed several times in the making.
The government has since backtracked, and French Budget Minister Jerome Cahuzac pledged on Friday to return to the status quo when someone who has created a company seeks to sell it later.
French officials are looking for ways to reduce the country’s excessive public deficit and debt, and Hollande won election on a platform of making the wealthy carry more of the load.
Bugeon said he was seeing start-up entrepreneurs looking to move their headquarters out of France and taking their families with them.
With the Internet “it is now possible to work in any corner of the world and come and spend one week a month in France,” said Thibault de Saint Vincent, president of Barnes France, the principal competitor to Daniel Feau.
Daniel Feau agreed that the profile of those who are leaving has changed, from the idle rich to “managers of major international corporations, entrepreneurs and investors much younger than previously who are scared of the marginal tax rate of 62.21 percent on sales of stock.”
The head of the French employers federation Medef, Laurence Parisot, has complained recently of emerging “anti-enterprise racism” in France.
No one is certain if the rush to the exit will continue, but Daniel Feau noted: “Nobody until now believed that the capital gains on shares would be taxed so high.”
It is not only the Paris region, more offers are coming onto the market in other areas of the country as well, the realtors added.
The preferred destinations of those leaving are London, New York and Geneva, as well as Canada, Israel and Singapore, said Laurent Demeure, head of Coldwell Banker France.
He said that Brussels remains a favorite of those older, who have already sold their business interests, and are looking to benefit from Belgium’s lighter taxation of trusts to pass on inheritances to their children.
“Next year to have dinner with friends, instead of a taxi I’ll more likely need to take the Thalys for Brussels or the Eurostar to London,” joked Demeure, referring to trains that link the three capitals.
He said he is currently receiving on average one request per day to appraise a luxury apartment or home.
As a result, in the previous two to three months the price of large Paris apartments had slid by 5 percent.
However, real estate agents do not expect a collapse, as the offers to sell still remain low and interest by foreign buyers firm.