Property: The end of tax cuts that will really change for French owners in 2025

The French real estate market is on the verge of a major upheaval. With the Finance Bill 2025 now under discussion, landlords find themselves at the center of major tax reforms that could change the way property is taxed. Traditional capital gains tax breaks, primary residence exemptions and other tax benefits that favored investors in recent decades are under scrutiny. These changes, taking place in a tense economic context and a gloomy real estate market, raise the question: how will owners adapt to these new measures?

Tax reforms on real estate capital gains

The first strong point of this law concerns the end of shortening the length of detention. Owners currently benefit from significant tax exemptions on property capital gains achieved after 22 years of property ownership, with full exemption from social security contributions after 30 years.

However, according to the terms of the project, this measure could be replaced by indexation of the purchase price of the property according to inflation. The goal of such a reform is to “more faithfully reflect economic reality” and prevent the creation of artificial capital gains due to inflation, according to the MPs in charge of the file.

This amendment could fundamentally change the investment strategy of real estate owners in the long term. With this replacement of existing adjustment items by indexation of the acquisition price, it could reduce the tax claims associated with holding the property longer. The project also proposes to apply a flat tax rate on capital gains, currently 30%, but which could rise to 33%. The changes, reform advocates say, are meant to “energize the market” and encourage owners to return their assets to it more quickly.

Changes to the Principal Residence Exemption

Another important part of the reform concerns the exemption of capital gains from the sale of the main residence from tax. The amendment now stipulates that this exemption is conditional on a minimum duration of five years of actual residence in the property. This change aims to limit tax abuse and promote housing stability. However, exceptions are established in special cases, such as professional transfers, separation or even hospitalization, so that unforeseen situations are not penalized.

This measure could have implications for the residential mobility of households, especially young workers who are often forced to move for work reasons. By reducing the flexibility of the main residence exemption, specialists in the field fear slowing down the dynamics of the real estate market, which is already affected by rising interest rates.

While some believe that this reform will make transactions smoother and curb speculation, others fear that real estate investment will become less attractive. Ultimately, these new rules could also force some owners to rethink their investment strategies, with impacts that are still difficult to assess in the long term.

The reforms proposed as part of the Finance Bill 2025, notably the removal of the reduction in holding period and the tightening of head office exemption conditions, are clearly designed to simplify the tax system and revive the stagnant property market. However, these changes risk fundamentally changing the strategies of investors and owners by reducing the tax benefits traditionally associated with long-term holding. While some players in the sector see these measures as an opportunity to revive the supply of real estate amid the collapse, others see it as a threat to residential mobility and the attractiveness of long-term investments. The debates surrounding this project are only at the beginning and the consequences for the French real estate market will gradually emerge as these reforms enter into force.

Luc Jose A.

A graduate of Sciences Po Toulouse and holder of the blockchain consultant certification issued by Alyra, I joined the Cointribune adventure in 2019. Convinced of the potential of blockchain to transform many sectors of the economy, I made a commitment to raise awareness and inform the general public about this ever-evolving ecosystem. My goal is to enable everyone to better understand blockchain and take advantage of the opportunities it offers. Every day I try to provide an objective analysis of current events, decipher market trends, convey the latest technological innovations and put into perspective the economic and social problems of this ongoing revolution.

DISCLAIMER OF LIABILITY

The comments and opinions expressed in this article are solely those of the author and should not be considered investment advice. Before making any investment decision, do your own research.