Reintroducing Depreciation in Real Estate: A Game Changer

In a move that could potentially revolutionize the French real estate sector, the government is considering reintroducing depreciation in the realm of property investments. The Finance Bill for 2025, yet to be officially adopted, has sparked a heated debate among professionals, investors, and analysts, all eager to understand the implications and consequences of such a change.

#### What is Depreciation?

Depreciation is a process that allows investors to deduct the cost of a tangible asset over its useful life. In other words, it is an accounting method used to allocate the cost of a property over its expected lifespan. This can result in substantial tax savings for property investors, who can then reinvest the funds and boost their overall returns.

#### The Current Situation

Currently, depreciation is not allowed in the French real estate sector. The proposed reintroduction of this accounting method has been met with mixed reactions, with some welcoming the change as a much-needed boost for the industry, and others expressing concerns over its potential impact on the overall economy.

#### The Expected Benefits

Reintroducing depreciation could have several positive effects on the real estate sector, including:

- Increased Investment: By allowing investors to deduct the cost of a property over its useful life, the government hopes to incentivize more people to invest in real estate, thereby increasing the supply of properties available for rent or sale. - Higher Quality Properties: With more funds available for reinvestment, landlords and property managers could potentially improve the quality of their properties, making them more attractive to tenants and buyers. - Greater Tax Savings: The reintroduction of depreciation could result in significant tax savings for property investors, freeing up funds that could be used to invest in other sectors of the economy.

#### The Potential Drawbacks

Despite the potential benefits, reintroducing depreciation could also have some negative consequences, such as:

- Reduced Government Revenue: By allowing property investors to deduct the cost of a property over its useful life, the government could see a reduction in tax revenue, which could impact its ability to fund public services and infrastructure projects. - Increased Inequality: Critics argue that the reintroduction of depreciation could exacerbate existing inequalities in the real estate sector, with wealthier investors benefiting the most from the tax savings. - Market Distortion: Some experts warn that the reintroduction of depreciation could lead to market distortions, with investors favoring certain types of properties over others in order to maximize their tax savings.

#### Conclusion

The reintroduction of depreciation in the French real estate sector is a complex issue with far-reaching implications. While it has the potential to boost investment, improve property quality, and result in greater tax savings for investors, it could also have negative consequences, such as reduced government revenue, increased inequality, and market distortion. As the Finance Bill for 2025 continues to make its way through the legislative process, all eyes will be on the government to see how it handles this controversial issue.