Finance Law 2025: A New Turning Point for the Luxury Real Estate Market

While the high-end real estate market had already become more selective in 2024, the French 2025 Finance Law introduces additional tax pressure on high net worth individuals. The result is a less favorable environment for investing in prestige properties and an increased need to carefully structure transactions.

 

A Tight Budgetary Context Targeting High Net Worth Individuals

The 2025 Finance Law aims primarily to reduce the public deficit to 5.4% of GDP. To achieve this, the government has chosen to both increase revenue and control public spending. In this context, several measures directly affect the wealthiest households, including higher income tax brackets, additional contributions, and maintaining a demanding wealth tax regime. For luxury real estate investors in Paris and other major metropolitan areas, these changes significantly alter the risk/return profile.

Increased Tax Burden on High Net Worth Individuals

Although the previously proposed “expanded IFI” (real estate wealth tax) was ultimately dropped, the Impôt sur la Fortune Immobilière (IFI) remains unchanged in its structure but still highly impactful:

• Tax scale up to 1.5% for the highest real estate wealth brackets

• No new significant exemptions

• Parallel strengthening of contributions targeting high incomes

For owners of prestige properties, the overall tax bill increases mechanically. The IFI, combined with additional income tax contributions, reduces financial flexibility, particularly for multi-property investors or owners of large family residences.

A Less Incentivizing Tax Environment for Luxury Real Estate

The 2025 Finance Law also introduces:

• A rise in income tax rates, roughly +1.8% on certain brackets

• A differential contribution on high incomes, added to existing levies

This accumulation directly affects the net investment capacity of high-end property buyers. Many are scaling back their projects, postponing purchases, or turning to foreign markets that are more attractive from a tax perspective (Lisbon, Dubai, Geneva, London, etc.).

Reduced Room for Maneuver for Wealthy Buyers

The overlay of multiple taxes creates a real squeeze for investors: less purchasing capacity, higher structural costs, and eroding real estate profitability.

As a result, investment strategies are evolving:

• Increased use of investment structures (SCI, family SARL, real estate holding companies)

• Geographic arbitrage (reducing Paris exposure, seeking more favorable markets)

• Rigorous property selection, favoring rare addresses and heritage assets with strong safe-haven value

Direct acquisitions of very large properties by individuals are becoming less frequent.

Towards a Slowdown in the High-End Market?

In Paris’s most coveted districts (6th, 7th, 8th, 16th) as well as in some prestigious seaside resorts, professionals anticipate:

• Longer sales timelines

• Increased scrutiny of buyer dossiers

• A drop in transactions above €3–5 million

Against competing capitals with softer tax regimes, France risks losing some international investors or pushing certain family estates to restructure outside the country.

Conclusion: A Demanding Framework That Favors Structured Wealth Strategies

The 2025 Finance Law clearly marks another step in taxing high net worth individuals. While it diminishes the immediate appeal of luxury real estate in France, it still offers levers for investors who rely on:

• Strong wealth structuring

• Targeted asset selection

• Strategic geographic choices

• Optimized IFI management

Now more than ever, the high-end real estate market requires expertise, where legal, fiscal, and wealth advisory support plays a key role in securing and enhancing investments.