In a referendum on 23rd June 2016 the UK electorate voted to leave the European Union and the world looked on to see what the political and economic impact would be. Though still in the “negotiation” phase, officially the UK will leave the EU on 29th March 2019. However, a transition period has been put in place, with 31st December 2020 as the date that new rules and regulations will be implemented.
It’s clear that both President Macron and the French property market are keen to capitalize on the UK’s decision. We’ll look at the residential market shortly but it’s prudent to look at how businesses are viewing the decision first. Late last year Paris beat London, Frankfurt & Berlin to the largest office deal of the year – a €1.8bn sale in La Defense. This was not an isolated case but a symptom of the wave of confidence that is sweeping through the French commercial real estate sector. The transfer of the European Banking Authority from London to Paris was a high profile affair – not only will it relocate 200 jobs to the capital but also 40,000 hotel nights a year.
President Macron has been directly targeting London. His efforts to push through long delayed labour market reforms and tax changes means that international investors no longer see London as their default destination. The fact that the President is a former investment banker is a factor that US banks are also taking into consideration. Brexit is an opportunity the French Government is doing all it can to capitalize on, as banks and financial institutions will need to move out of London because they will lose their “passporting” rights, which allow them to operate across the bloc.
A recent survey showed that nearly two thirds of international real estate investors are concerned about the new UK regime on taxing gains made by non-resident investors on property. The changes come into effect in April 2019, non-resident investors will pay Capital Gains Tax on all types of UK property (extending rules that currently apply to residential only). To foreign investors, France offers diversification, safe euro-denominated assets, a country in a phase of political renewal and economic renaissance. Contrast this to the UK where the Brexit vote appears to have created turmoil.
Impact of Brexit on the residential market in France
So how has this impacted the residential market?
There are no official figures yet for sales to UK buyers since the referendum in 2016. However, around one in six sales to UK buyers in France are made through Leggett Immobilier, so an analysis of those figures should be an accurate reflection of the whole market. In short – sales to UK buyers have increased since the Brexit vote. Both enquiries and sales have increased year on year and it appears that the closer leaving date looms, the stronger the demand.
Trevor Leggett, Chairman of Leggett Immobilier comments: “We saw an immediate drop in enquiries immediately after the vote in June 2016. The shock of the decision caused a short term paralysis in many sectors and people clearly put their search for French property on hold. However, this didn’t last long and in the subsequent months it became evident that there was a “Brexit backlash” taking place. Sales increased and those buying even increased their budgets slightly (+7% when FX rates are taken into account). Don’t forget that 28% of people didn’t vote and 48% voted to remain. It is now clear that many of these people decided that they wanted to keep some form of connection with the EU and that a property in France was a good way of doing this.
The one figure that has dropped is the number of British home-owners in France looking to move back to the UK. These vendor numbers are down as current owners are (mainly) happy here and feel welcome. Many are seeking French nationality.
In essence, nobody knows what the new deal will look like but it’s 100% sure that you will still be able to buy & sell property in France. We literally have hundreds of clients each year who buy from Australia, the Far East, America and other countries outside the Eurozone. There might be a little more red tape to go through but British people have bought property and lived in France for hundreds of years…this isn’t going to change.”