Industry operators fear that this sales tax increase will weaken the tentative recovery of the real estate market.
To alleviate the budgetary efforts required of the departments, Prime Minister Michel Barnier announced on Friday 15 November the possibility of raise the ceiling taxes on real estate transactions, a measure that angers real estate professionals.
Taxes on transfers for consideration (DMTO), often incorrectly called “notary fees”, make up the majority of taxes paid on the purchase of real estate. They represent a fifth of the departments’ income and have fallen sharply in the last two years due to the crisis in the real estate market.
Departments can set a DMTO rate of up to 4.5% of the purchase price of an old property, plus taxes collected by the state and municipalities. Michel Barnier proposed on Friday to increase this ceiling by 0.5 points, to 5%, for three years, and leaves it up to departments to decide whether or not to make use of this option.
€1000 more for a purchase of €200,000
If “the intention is laudable for local authorities”, the increase in DMTO “risks discouraging home buyers and compromising the timid recovery observed following the – beneficial – decline in interest rates”, estimates Loïc Cantin, president of the National Real Estate Federation (Fnaim).
For Maël Bernier, communications director of the broker Meilleurtaux, this is “very bad news for younger buyers”, for whom the “first purchase” will be “even more difficult”, she reacted ON.
“This increase in notary fees is not intended to dissuade French people whose real estate project is underway from taking action, but it is another bad signal for owners,” regrets Brice Cardi, president of the cooperative network L’Adresse.
“If this 0.5% increase seems low – that’s an extra €1,000 in fees to pay for a €200,000 purchase – it follows the 0.7% increase proposed by the government in 2014 and gradually implemented by most of departments”, relaunches the broker Vousfinancer.
Decline in department revenue
The downturn in the real estate market has resulted in billions of euros in proceeds less revenue for departments: 3.8 billion less precisely between 2022 and 2023. And this year too, elected officials fear a further drop of 10 to 15%, or a cumulative loss of 5 billion compared to the 2022 peak.
François Sauvadet, president of the French departments, is therefore satisfied with having been “listened to” and denies fears of an acceleration of the real estate crisis.
He recalls that “new buildings are not affected” and believes it is understandable to pay “a few hundred euros more to participate in cohesion”.
For its part, the Superior Council of Notaries “takes note” of this announcement and looks forward to being able to “measure the impact on the real estate market, which has not yet recovered”, its spokeswoman Céline told AFP.
“We must remain vigilant (…) on the recovery conditions” of the real estate sector, currently “stalled”, underlined Michel Barnier. However, he believes that “the effort indicated is acceptable from this point of view”.
Loïc Cantin expects that the option to increase the DMTO ceiling will be “used by all local authorities” and that the measure will be perpetuated.