As part of the Finance Bill (PLF) 2025, an amendment proposes a major reform to the exemption from capital gains tax on the sale of a principal residence. The aim? To limit property speculation by making this exemption conditional on a minimum five-year occupancy period.
In reality, this amendment could raise a number of issues without actually hindering speculators.
A reform to combat property speculation?
Capital gains realised on the sale of a principal residence are currently exempt from tax, a measure that has enabled many owners to sell their property without being subject to taxation on the gains. However, this exemption has also encouraged speculative practices, particularly in areas of high demand where property prices are rising rapidly. Some investors have taken advantage of this to buy a property, declare it their principal residence and then sell it quickly, thereby benefiting from the tax exemption.
The tax authorities can already challenge this exemption if they can prove that the purchase of the property was purely speculative. However, to step up the fight against speculation, the PLF 2025 introduces an amendment to make exemption from capital gains tax conditional on a minimum holding period of five years. In other words, to qualify for this exemption, the owner will have to have occupied the property for at least five consecutive years before selling it.
This amendment is particularly aimed at tense real estate zones, such as tourist areas, where pressure on the property market is high. The aim is to reduce the number of quick purchases and sales, which are often used by speculators to evade tax while benefiting from rising prices. The aim is to stabilise the property market by encouraging people to hold property for longer, thereby limiting the artificial rise in prices and making it easier for local residents to buy their own home.
Exceptions to this rule limit its scope
This new five-year occupancy period will not apply in all situations. Exceptions have been made to avoid penalising homeowners faced with unexpected life changes. For example, capital gains will continue to be exempt if the property is sold for compelling reasons such as :
- A professional transfer ;
- Long-term hospitalisation or admission to a nursing home;
- death or separation.
In addition, this exemption may be maintained for an indefinite period if the sale is used to finance the purchase of a new principal residence, so as not to penalise owners who sell their property to buy another, as part of a legitimate residential move.
Impact on bona fide sellers who want to rent before buying a main residence?
The PLF 2025 amendment could create new challenges for some bona fide sellers. For example, those who prefer to rent temporarily before buying a new principal residence risk losing the benefit of the exemption if they fail to meet the five-year deadline. This could force households to keep their property in order to avoid taxation, even if they wish to move.
Impact on speculators?
The question of the impact of this reform on the property market is giving rise to debate. For supporters of the reform, the minimum holding period of five years could have a positive effect by making the market more fluid. By limiting speculative short-term purchases, the reform would give buyers looking for a principal residence fairer access to the market, without having to suffer the effects of speculation.
However, some industry experts believe that this measure could harm residential mobility, particularly for young households or people who have to move house frequently. They risk being forced to hold on to a property for longer than they would like.
And beyond the debate?
In practice, there will be nothing to prevent a speculator from buying a new property to set up his main residence and continue buying and selling. He will then benefit from the exemption on property capital gains, unless the tax authorities reclassify this activity as trading in property, a measure they are already able to take. The relevance of this amendment as a brake on speculation therefore remains contested.
Conclusion: A reform that adds complexity without solving the problem of speculation
The reform proposed in the PLF 2025, which makes exemption from capital gains tax conditional on a five-year holding period, is intended to curb speculation in property, particularly in tense areas. While the aim of this measure is laudable - to stabilise the market and make access to property fairer for local residents - it raises a number of questions about its real effectiveness. Indeed, despite the intention to limit speculative practices, the reform could prove ineffective in the face of clever speculators who could easily get round the rule by buying up new properties under the guise of a principal residence.
In addition, the exceptions made for reasons of force majeure or legitimate residential mobility are a relief for some landlords, but risk hampering the fluidity of the market for those who simply wish to buy and then rent a property before settling down. Finally, the implementation of this reform seems to pose a dilemma: although it seeks to protect households from the effects of speculation, it could also penalise those who need greater flexibility in the property market. Overall, despite its good intentions, this reform may not be enough to effectively limit speculation, as there are still many loopholes and the complexity of its implementation is a cause for concern.
