Will real estate still be profitable for the city of Paris in 2023?

9:00 am, October 31, 2022

Is the slowdown in the real estate market likely to jeopardize the capital’s financial future? While the 2023 budget will be debated in the Paris Council next month, the drop in tax revenue on transfer fees for consideration (DMTO), known as “notary fees”, could put a community whose debts will struggle. It rose to 7.75 billion euros as of December 31.
With prices soaring in the capital, these property taxes paid by buyers of an old home or apartment (plus the sale price) have registered an impressive increase since 2013: +89%! Last year, they brought in 1.734 billion euros. register.
A regional group with a unique status, comune and arrondissement, Paris relies heavily on these DMTOs, which include the departmental land registration tax and departmental registration fee as well as an additional municipal tax: they account for nearly a fifth of its resources.

A slight decrease in prices within one year

“For years, this recipe has been driven by the dynamism of the real estate market.”, admits Paul Simondon, MP in charge of finance and budget. The elect also notes that up to 20% of the equity fund is capitalized, allowing a portion of tax resources to be redistributed from the best awarding departments to the most disadvantaged. Paris’ contribution to this fund increased by 25% in 2022 to reach €269.7 million. Without questioning this mechanism of solidarity, Paul Simondon sees “inappropriate” This enhanced parity at the expense of the capital severely affected by the health crisis. Since the start of Covid-19, “The cost of the city is about 1.2 billion euros, without significant government assistance”Says Paul Simondon.

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While in September, prices in the capital fell by 1.2% in one year, according to figures published Thursday by notaries of Greater Paris, Sales volume is still very high.notes their spokesperson Fleur de Saint-Maurice. “A new record was broken in Paris with 40,550 transactions over the twelve months as of June 30, ie +18% compared to 2020-2021 over the same period.”The lawyer adds. As a result of the Climate and Resilience Act, adopted in July 2021 to speed up the energy transition and which aims to phase out, from next January, the rental of more energy-intensive properties. In Paris, some owners of thermal refineries (in the capital, two-thirds of the private leased stock) undoubtedly decided to get rid of them before the January ax.

Interest rates are on the rise

With credit conditions tightening, the European Central Bank (ECB) has already raised interest rates twice this year and announced the possibility of further increases. “This increase is beginning to appear in the market.”notes Grégoire de Flers, Paris-based sales director for online agency Hosman. “We are in a falling price dynamic that will take hold.” Experts note a slowdown in sales in recent months. ” There will be an impact on revenue that we haven’t measured yet, Paul Simondon warns. We can no longer count on the regular development of these recipes as in the past fifteen years. » Last month, Nicolas Bonnet Allledge, head of the Communist Community in the Paris Council, presented Anne Hidalgo a report on local finances recommending in particular to double the tax on vacant housing by at least four; Raising the tourist tax ceiling in palaces and five-star hotels. Or even increase the housing tax on second homes in narrow areas.

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In the current context, with rising expenditures – energy in particular – “A downturn in the real estate market would be a real disaster”, warns Paris Chancellor (LR) Marie-Claire Carrier G., chair of the Finance Committee. If the US rating agency Standard & Poor’s maintains an AA rating for Paris “steady look” Thanks to “Effective management of expenditures and maximization of department revenues”, denounces the elected representative of the fourteenth district, “bad management” and financial situation “dramatic”.
On September 29, she wrote to Anne Hidalgo to hold her accountable. “Looking at the figures observed during the examination of the recent administrative accounts of the City of Paris, we have observed a worrying drift in the city’s cash flow, in parallel with the explosion of debt”wrote Marie Claire Carrier J, fearing that monetary tools are now used to cover simple mismatches, but“A structural gap between income and expenditure amounting to several hundred million euros each month.”

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