French tax reform boosts investors

Potential changes to the French inheritance tax system are set to provide a boon to British investors looking to purchase property in the country, according to estate agent Unique Living.

As part of a package of reforms proposed by new president Nicolas Sarkozy, the inheritance tax threshold in France will be trebled.

This means only the top five per cent of properties are likely to be liable to pay the tax under the new régime – and as a result smaller investors from the UK are unlikely to be affected.

"As a company selling in France this is certainly good news," said Serge Cowan, managing director of Unique Living International Estate Agents.

"This will boost interest even further in investment in France, a country much loved by the British."

However, there are warnings from other sections of the overseas property industry over the future of finance in the country.

While prices in France are expected to remain stable during 2008, according to Homesworldwide.co.uk, changes to the interest rate at home could cause concerns.

The Bank of England cut rates by 0.25 per cent in December, down to 5.5 per cent, with further cuts expected.

As a result, Homeworldwide.com is urging investors to take out mortgages in France in euros, to insulate cash from any potential deterioration in exchange rates as a result of falling interest rates.

Yet, the tax changes could outweigh these concerns.

"Most buyers now know that they can invest in France without fear of having their estate taxed when they die," concluded Mr Cowan.

"This has to be a great comfort and will naturally encourage further investment in this most charming of countries."