Oct 8, 2012
Back in July, when the news of the French foray into the “fairness doctrine” hit, and we learned of Hollande’s plan to tax all those making over €1 million at a 75% tax rate, we said that “we are rotating our secular long thesis away from Belgian caterers and into tax offshoring advisors, now that nobody in the 1% will pay any taxes ever again.” We should have also added that we are buying all the available long-dated call options in French real estate firms, with the imminent surge in luxury real estate dumping, once the French “1%” decide they want nothing to do with a regime that is hell bent on confiscating 75% of their annual cash flow at first, and slowly moving toward pocketing the balance of their assets (remember what we said in September 2011: that 30% global tax on all financial assets in a New Normal insolvent, and wealth redistributive world, is inevitable, and it iscoming). Sure enough, the wholesale dump of luxury properties has now begun.
AFP writes: “A flood of top-end properties are hitting the market as businessmen seek to leave France before stiff tax hikes hit, real estate agents and financial advisors say. “It’s nearly a general panic. Some 400 to 500 residences worth more than one million euros ($1.3 million) have come onto the Paris market,” said managers at Daniel Feau, a real-estate broker that specialises in high-end property.” But that would mean that in the New Normal real estate is once again merely a credit-bubble dependent, flippable asset: not a long-term housing investment, but merely one in which the pursuit of the greater fool is all that matters (not news to anyone here, but certainly news to all those who actually believe that ‘housing has bottomed’).
Turns out it hasn’t, and just like the stock market, it was simply an alternative asset class for those closest to the ZIRP cost basis, to invest their money until Uncle Socialist comes a-knocking.
A flood of top-end properties are hitting the market as businessmen seek to leave France before stiff tax hikes hit, real estate agents and financial advisors say.
“It’s nearly a general panic. Some 400 to 500 residences worth more than one million euros ($1.3 million) have come onto the Paris market,” said managers at Daniel Feau, a real-estate broker that specialises in high-end property.
But if France is a loser, someone has to be a winner. For now it is the traditional real estate money-laundering venues.
The preferred destinations of those leaving are London, New York and Geneva, as well as Canada, Israel and Singapore, said Laurent Demeure, head of Coldwell Banker France.
He also noted that Brussels remains a favourite of those older, who have already sold their business interests, and are looking to benefit from Belgium’s lighter taxation of trusts to pass on inheritances to their children.
“Next year to have dinner with friends, instead of a taxi I’ll more likely need to take the Thalys for Brussels or the Eurostar to London,” joked Demeure, referring to high-speed trains that link the three capitals.
He said he is currently receiving on average one request per day to appraise a luxury apartment or home.
As a result, in the previous two to three months the price of large Paris apartments had slid by five percent.
This is only the beginning as those who think Hollande was only kidding realize the folly of their ways. However, the biggest issue is that the encroaching taxation of the world’s 1% by insolvent sovereigns is only just beginning. Very soon a comparable approach to the real estate assets of the uber wealthy will be adopted by virtually every other target of capital flows, just as we predicted a week ago, when we predicted that those countries which had heretofore been encouraging money laundering into domestic real estate, are about to see an about face, and going forward will instead pull a “Hollande” and proceed to tax the bejesus out of anyone with ultra luxury housing recently purchased on the territory of [you name it broke country]. To wit:
What the NAR is saying is that for now go ahead and lift every offer on every duplex and triplex off Central Park. Your money is absolutely safe with us… this instant. But the second a broke Europe comes demanding reparations for endorsing 4 more years of Obama (something that was already documented), for destroying the Swiss banking industry, and for keeping the EUR much higher than it would have been had it not been the Chairman’s 5 easing episodes, all bets are off.
This means all European, Asian, and even local oligarchs may be sweating just a little bit, now that the winds have shifted, and suddenly what was considered safe and untouchable, has become fair game in the great “fairness” redistribution scheme that is the only game left in a broke and insolvent global town.
So while for now the French exodus is benefiting the other legacy (and now thoroughly centrally-planned) free market venues, soon, just as in the case of the collapse of Swiss bank secrecy, all nations will realize that the Nash Equilibrium has been broken, and if everyone hikes taxes comparably, there is no place where increasingly more diluted money can escape to.
Which ultimately is the endgame as more and more wealth is legally sequestered by the government so that it can be redistributed as a few politicians best see fit.
This article was posted: Monday, October 8, 2012 at 2:07 am