8th Arsene real estate tax barometer: concerns and investment strategies modified by the crisis for real estate professionals in 2021?

Arsene, French firm of business lawyers specializing in tax law exclusively reveals the results of the 8 th edition of the barometer dedicated to the issues of property taxation:

The trend observed in previous barometers is confirmed: warehouses will experience the fastest growth in 2021 for 45% of respondents, ahead of housing (31%), shops (11%) and far ahead of offices (5%) .

Half of those polled (52%) positively consider the tax measures adopted so far under the Macron presidency, a figure up from 2020 (30%). This assessment is however more severe in terms of real estate taxation: 29% of professionals in the real estate industry say they are satisfied.

1/3 of respondents benefited from the fiscal measures taken in the context of the crisis in 2020. 80% considered that the measures were necessary, but insufficient for 41% .

The Covid crisis led to a significant drop in tax audits in 2020. 29% of respondents were subject to a tax audit, compared to nearly half (49%) in 2019.

Relations with the tax administration have not changed for 87% of respondents, indicating a status quo compared to previous years. The context of the health crisis, however, allowed a more conciliatory listening on the part of the tax authorities for 23% of those polled.

International tax standards are taking an increasingly important place in decision-making:  59% of respondents consider them to be important, even very important (compared to 46% in 2019).

70% of real estate professionals surveyed indicate that the Covid crisis has an influence on their investment strategy , and 86% believe that it will have an impact on the real estate market in terms of users’ m 2 need .

Every year since 2011, Arsene has presented the results of its real estate tax barometer, which reflects the expectations and concerns of professionals in the sector. In 2021, the tax measures taken by President Macron for businesses and the Covid crisis represent important issues for respondents.


Tax issues, a priority issue

Many issues related to taxation remain central. This trend has been confirmed over the years, and in general, the concern around tax issues is more important in 2021 than in 2020. Indeed, tax issues are among the priorities during the discussions of the boards of directors for 81 % of respondents (compared to 76% last year). The barometer reveals that frequent variations in legislation and tax security were and remain the major concerns (trends unchanged since the creation of the barometer in 2011).

“  We note this year that 52% of those polled think that the fiscal measures taken by President Macron and his government are generally satisfactory, which is a significant increase compared to last year. As for the real estate industry, the findings are more severe: 29% of real estate professionals consider their decisions to be satisfactory. This figure is however up compared to 2020. The various tax incentive schemes for developers (Pinel scheme, exemption of capital gains from land transfers to build social housing), however, remain insufficient because they are considered satisfactory or even very satisfactory for only 34% of respondents ”, comments Franck Llinas, partner at Arsene in the real estate tax practice.

A third of respondents have benefited from the fiscal measures taken by President Macron and his government during the Covid crisis in 2020. A large majority of respondents (80%) consider them necessary, but they are perceived as insufficient for 41% of ‘between them. 20% found them poorly or poorly adapted. The reduction in corporate income tax as well as the maintenance of a tax credit for abandonment of rent would, according to the respondents, be the best ways to help the real estate industry.

Decrease in tax audits and status quo of relations with tax authorities

The Covid crisis led to a significant drop in tax audits in 2020: 29% of respondents said they had been subject to a tax audit, compared to 49% in 2019. The results show that after a sharp deterioration in relations with the tax administration expressed in 2017, they continue to stabilize (87% believe that relations have not changed).

The perception of respondents is slightly better (57% against 50%) and more clear-cut than the previous year on their assessment of the quality of listening, understanding and relationships of trust with the services of the FISC administration. While some consider it bad (7%), others consider it very good (14%). ” There is no doubt that the answer depends greatly on the quality of your contact within the tax administration”, explains Franck Llinas.

The impact of the Covid crisis on investment strategies

The majority of real estate professionals surveyed (70%) believe that the Covid crisis has an influence on their investment strategy, involving 46% of them to rethink their real estate needs. In addition, 86% believe that it will have an impact on the real estate market in terms of users’ m 2 needs . Caution is therefore required: the results show that, for those concerned, two-thirds of those polled do not think of accelerating their arbitrage strategy (acquisition or sale) because of the Covid crisis.

The market is more sluggish in terms of investments: 28% of respondents believe that they will be wait-and-see this year (against 16% in 2020), which translates into a corresponding drop in respondents thinking of selling and buying this year (29 % against 42% in 2020). The real effects of the crisis will take time to be known. This should probably encourage those who can to wait before arbitrating. In addition, 59% of respondents believe that the OPPCI regime is essential for investing in France (compared to 40% in 2020). », Specifies Franck Llinas .

In this environment, the major investment trends are changing. In 2021, the warehouses are the 1 st target assets (45% against 37% in 2020), standing out as the investment with the greatest potential for growth. Housing represents a third (31%) of targeted assets , overtaking shops (11%) and offices, which only constitute 5% of targeted assets, against 16% in 2020.

The price level represents the most important obstacle in terms of investment (with 3.28 pts, scale of 1 to 4 where 4 represents the most important factor and 1 the least important factor). A trend reversal is notable in 2021: yield uncertainty (2.92 pts) is now a greater concern than the scarcity of supply (2.78 pts).

Methodology:
This barometer was carried out by Arsene in the first quarter of 2021 with 148 professionals in the real estate sector: developers, funds, property companies, asset management, etc. Respondents occupy the following positions, in France and internationally: General Management or Partners, Legal Department, Accounting and Finance Department, Tax Department, Investment Director, Asset Manager and Fund Manager.

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