will real estate still be profitable for the City of Paris in 2023?

9:00 a.m., October 31, 2022

The slowing down of estate market
does it risk jeopardizing the financial future of the capital
? While the 2023 budget will be debated at the Paris Council next month, a drop in tax revenue on transfer duties for consideration (DMTO), commonly known as “notary fees”, could put the community whose debt will be in difficulty. increased to 7.75 billion euros as of December 31.​
With soaring prices in the capital, these property taxes paid by the buyer of an old house or apartment (in addition to the sale price) have recorded a fantastic increase since 2013: +89%! Last year, they brought in 1.734 billion euros. A record.​
A territorial collectivity with unique status, both commune and department, Paris is highly dependent on these DMTOs, which include the departmental land registration tax and departmental registration fees as well as the additional municipal tax: they represent approximately one-fifth of its resources. .

Slight decline in prices over one year

“For years, this recipe has been driven by the dynamism of the real estate market”, recognizes Paul Simondon, deputy in charge of finance and budget. The elected also recalls that the capital abounds up to 20% of the equalization fund allowing the redistribution of part of the tax resources from the best endowed departments to the most disadvantaged. The Parisian contribution to this fund has increased by 25% in 2022 to reach 269.7 million euros. Without questioning this solidarity mechanism, Paul Simondon considers “inappropriate” this strengthening of equalization to the detriment of the capital, strongly affected by the health crisis. Since the start of Covid-19, “the cost for the City is around 1.2 billion euros, without significant state aid”says Paul Simondon.

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While in September prices in the capital fell by 1.2% over one year, according to figures published Thursday by the Notaries of Greater Paris, “the volume of sales remains very high”notes their spokesperson Flore de Saint-Maurice. “A new record was even beaten in Paris with 40,550 transactions over twelve months as of June 30, i.e. +18% compared to 2020-2021 over the same period”, adds the lawyer. A consequence of the Climate and Resilience Law, adopted in July 2021 to accelerate the energy transition and which aims to gradually ban, from next January, the rental of the most energy-intensive properties. In Paris, some owners of thermal colanders
(in the capital, two-thirds of the private rental stock would be affected) have no doubt decided to get rid of them before the January ax.

Interest rates on the rise

​As credit conditions have tightened, the European Central Bank (ECB) has already raised interest rates twice this year and announced that further hikes were likely. “This increase is starting to be felt in the market”notes Grégoire de Flers, sales director in Paris at the online agency Hosman. “We are in a dynamic of falling prices which will take hold. » Experts observe a slowdown in sales in recent months. ” There will be an effect on revenues that we have not yet measured, warns Paul Simondon. We can no longer count on a regular evolution of these recipes as in the last fifteen years. » With Nicolas Bonnet-Oulaldj, president of the communist group at the Council of Paris, he handed over, last month to Anne Hidalgo, a report on local finances recommending in particular to multiply at least by four the tax on vacant housing; to remove the ceiling on the tourist tax in palaces and five-star hotels; or even the increase in housing tax on second homes in tight areas.

Read also – In France, the regions drive the luxury real estate market

In the current context, with spending – energy in particular – soaring, “A downturn in the real estate market would be a real disaster”, warns the councilor of Paris (LR) Marie-Claire Carrère-Gée, president of the Finance Committee. If the American rating agency Standard & Poor’s maintained the AA rating of the City of Paris with “steady outlook” thanks to “effective management of expenditure and optimization of management revenue”, the elected representative of the 14th arrondissement denounces, “mismanagement” and a financial situation “dramatic”.
On September 29, she wrote to Anne Hidalgo to hold her accountable. “In view of the figures observed during the examination of the recent administrative accounts of the City of Paris, we have noted a worrying drift in the City’s cash flow, in parallel, moreover, with the explosion of the debt”writes Marie-Claire Carrère-Gée, fearing that cash instruments are now used to cover, not simple mismatches, but“a structural gap between income and expenditure of the order of several hundred million euros each month”.

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