French Property Investors Await Second Phase Of Tax Reform

by Ulrika Lomas, Tax-News.com, Brussels

15 September 2004

The French listed property sector could benefit from a significant boost if the government continues down the path of tax reform that has already resulted in a strongly rally in property shares, Reuters reports.

Following the introduction of tax efficient real estate investment trusts, known in France as Societes d'Investissements Immobiliers Cotees (SIIC), domestic property shares now trade at an average 6.2% premium to net asset value, according to the news service. This compares to a 21% discount prior to the introduction of the SIIC legislation last September.

Now experts believe the market could further strengthen if the government goes ahead with the second phase of this legislation.

"The first phase of SIIC legislation has been done, now the second phase...provides huge opportunities," Mark Townsend, executive director for British-based boutique funds group Asset Value Investors (AVI) was quoted by Reuters as observing.

"If it happens it would be a huge advantage," he predicted.

Changes introduced under the second phase of the reforms would allow large firms, such as car maker Renault, to bundle their property potfolio into a listed company and take advantage of reduced capital gains tax of 16.5% from 35%.

It is thought this could spark a rush of initial public offerings and reverse a longer term decline in French property stocks which currently make up only 2% of the Paris market.

Whilst the French government has yet to announce a timetable for the introduction of the second phase, the industry is expecting clarification of the issue before the year’s end.

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