Property tax in simulations: a hidden cost buyers forget

Why property tax can flip the result of your buy or rent simulation

When people run a buy or rent simulation, they usually focus on the purchase price, the mortgage rate (around 3.6% in early 2026) or the monthly rent. But one item is growing steadily in homeowners’ budgets: property tax. In a realistic buy or rent comparison, ignoring this cost – and especially its long-term increase – can completely distort the outcome.

Our simulator buy-or-rent.net includes two dedicated parameters:

• taxe_fonciere_annuelle: the first-year property tax amount
• taux_revalorisation_taxe_fonciere_annuelle: expected yearly growth rate of that tax

Understanding and setting these two values correctly is essential if you want an objective comparison between buying a home and renting while investing your savings elsewhere.

1. Quick reminder: how property tax works

Property tax (taxe foncière in France) is a local tax paid every year by the owner, whether they live in the property or rent it out. It depends on:

• the cadastral rental value of the property, updated periodically;
• the tax rates set by the city, inter-municipal body and department;
• possible temporary exemptions (new builds, energy-efficient renovation, etc.).

In practice, amounts vary widely:

• small, low-tax town: often €450–800 per year for a flat;
• large cities or highly taxed areas: €1,500–3,000 per year for a typical house;
• high-end properties or very expensive zones: €3,000–5,000+ per year.

This cost is added to all the other homeowner expenses: mortgage interest (loan rate), notary fees, potential second-home council tax, borrower insurance (around 0.25–0.45% of the loan), maintenance, renovation, and so on. From a buy or rent perspective, it’s a charge that tenants simply do not have, so it must be isolated and projected over time.

2. The “taxe_fonciere_annuelle” parameter: your starting point

In the buy-or-rent.net simulator, the field taxe_fonciere_annuelle is the property tax amount in year 1 of your projection. It is the base on which the yearly revaluation rate will be applied.

2.1. How to estimate it in practice

Two typical situations:

• Specific property already identified: ask the seller or agent for the latest property tax bill. Enter that exact amount into the simulation.
• General search in a city: if you don’t have a precise figure, use broad ranges:
  • 50–60 m² apartment in a large city: €900–1,500 per year;
  • 90–110 m² house in the suburbs: €1,200–2,000 per year;
  • 130–150 m² family house in a pricey area: €2,000–3,000 per year.

It is usually safer to take the upper end of the range, because in many cities property tax has increased faster than inflation over the last decade.

3. The “taux_revalorisation_taxe_fonciere_annuelle”: the real trap

The field taux_revalorisation_taxe_fonciere_annuelle is the average annual growth rate you expect for your property tax. This is often the parameter that makes the biggest difference in a buy or rent simulation.

3.1. What growth rate should you assume?

Some data points:

• National revaluation of cadastral values + local rate hikes: over 10–15 years, many French cities have seen property tax grow by 3–5% per year on average.
• Medium-term inflation target in the euro area: around 2% per year, with higher spikes between 2021 and 2023.

In the simulator, three typical scenarios are worth testing:

• Conservative: 2% per year (roughly aligned with moderate inflation);
• Realistic for big cities: 3–4% per year;
• Stress test for highly indebted municipalities: 5% per year or more.

By testing all three in your buy or rent simulation, you can see how this “hidden” cost might change the answer.

4. A 20-year example: how a rising property tax adds up

Take a couple hesitating between buying or renting a €300,000 apartment.

• Purchase price: €300,000 (existing property)
• Notary fees (7.5%): €22,500
• Loan rate: 3.6% over 20 years
• Borrower insurance: 0.30%
• Equivalent rent: €1,200/month, with rent increase of 2% per year (IRL-indexed)
• Initial property tax (taxe_fonciere_annuelle): €1,200

4.1. Scenario A: low property tax growth (2% per year)

We set taux_revalorisation_taxe_fonciere_annuelle = 2%.

Property tax in year 20:

• Formula: €1,200 × (1.02)¹⁹
• (1.02)¹⁹ ≈ 1.46
• Year 20 property tax ≈ €1,752

Cumulative cost over 20 years (geometric series):

• S₂₀ = 1,200 × (1 − 1.02²⁰) / (1 − 1.02)
• 1.02²⁰ ≈ 1.49 → numerator ≈ 1 − 1.49 = −0.49
• S₂₀ ≈ 1,200 × 0.49 / 0.02 ≈ 1,200 × 24.5 ≈ €29,400

So this couple will have paid almost €30,000 in property tax over 20 years, on top of their mortgage, insurance, and maintenance costs.

4.2. Scenario B: stronger growth (4% per year)

Now set taux_revalorisation_taxe_fonciere_annuelle = 4% in the buy or rent simulator.

Property tax in year 20:

• €1,200 × (1.04)¹⁹
• (1.04)¹⁹ ≈ 2.11
• Year 20 property tax ≈ €2,532

Cumulative cost over 20 years:

• S₂₀ = 1,200 × (1 − 1.04²⁰) / (1 − 1.04)
• 1.04²⁰ ≈ 2.19 → numerator ≈ 1 − 2.19 = −1.19
• S₂₀ ≈ 1,200 × 1.19 / 0.04 ≈ 1,200 × 29.75 ≈ €35,700

With just 2 percentage points more on the revaluation rate, total property tax over 20 years jumps by about €6,300. In a detailed buy or rent analysis, this can be enough to tilt the scales in favour of renting + investing, especially if your assumed investment rate (for ETFs, index funds, etc.) is reasonable, say 4–6% gross per year.

5. Comparing with renting: what tenants pay (and don’t pay)

Tenants do not pay property tax, but they are exposed to annual rent increases, usually linked to an inflation-based index. In our example, we assumed a 2% yearly rent increase. Over 20 years, the monthly rent would rise from €1,200 to approximately:

• 1,200 × (1.02)¹⁹ ≈ 1,200 × 1.46 ≈ €1,752 per month

The cumulative rent bill would then be very high (well above €350,000 over 20 years), but the tenant keeps their investment capacity: they can invest the upfront cash they did not lock into a purchase (notary fees, agency fees, renovation budget), and potentially the difference between rent and what a mortgage payment would have been.

In the buy-or-rent.net simulator, the investment rate parameter lets you see what this free cash could earn over 10, 15 or 20 years if invested (for instance in a global ETF through a tax-advantaged account). Property tax, on the other hand, is a pure expense: it does not build any financial asset.

6. Property tax, inflation and shrinking purchasing power

Another important parameter in the simulator is annual inflation. If inflation averages 2% per year, but your property tax revaluation rate is 4%, then:

• your income hopefully grows roughly in line with inflation;
• but your property tax grows at twice that pace;
• property tax takes a larger share of your budget every year.

That’s why it’s risky to look only at the first-year property tax. You really need the combination of taxe_fonciere_annuelle and taux_revalorisation_taxe_fonciere_annuelle over time. Without this, your buy or rent comparison is biased in favour of ownership.

7. Property tax is just one of several hidden ownership costs

Property tax is one of the major hidden costs of buying, but not the only one. A robust buy or rent analysis should also include:

• Notary fees: typically 7–8% for existing properties, 2–3% for new builds;
• Agency fees: often 3–5% of the price;
• Borrower insurance: around 0.25–0.45% of the loan amount per year;
• Renovation and maintenance: especially if the energy rating is poor and you’ll need to invest in insulation, heating systems, etc.;
• Property tax and its annual revaluation;
• Early repayment penalties, which in France can reach 3% of outstanding principal or six months of interest if you sell early.

Tenants mostly pay rent (with annual increases), home insurance and some service charges, but no property tax and no major structural works. The buy or rent decision is therefore never a simple “mortgage vs rent” comparison. All cash flows have to be considered, including this recurring tax.

8. How to use the property tax parameters in the simulator

On buy-or-rent.net, to get the most from the taxe_fonciere_annuelle and taux_revalorisation_taxe_fonciere_annuelle settings, you can:

• Enter the actual property tax from a recent bill if you already have a target property;
• Test several revaluation rates: for example 2%, 3.5% and 5%;
• Combine this with different investment rate assumptions (cautious vs more aggressive portfolios);
• Compare your net wealth (home value – remaining loan – cumulated costs + financial assets) after 10, 15, 20 or 25 years in each scenario.

This data-driven approach shows that property tax alone can eat up tens of thousands of euros over the long run and meaningfully affect the buy or rent balance.

9. Buy or rent: there is no one-size-fits-all answer

Factoring in property tax and its yearly revaluation does not automatically mean renting is better, or buying is better. The outcome still depends on:

• your holding period (5, 10, 20+ years);
• prevailing mortgage rates when you buy (around 3.6% currently, but that can change);
• expected real estate price growth in your area;
• your ability to achieve a decent investment return if you stay a tenant;
• how aggressively your local authority might raise property tax in the future.

There is therefore no universal answer to the “buy or rent” question. It depends on your personal situation, your city, your career plans and your risk tolerance.

The figures and examples in this article are general and educational. They are not personalised financial advice. For a decision involving hundreds of thousands of euros, you should also talk to qualified professionals (financial adviser, mortgage broker, notary).

10. Next step: plug your property tax into the simulator

If you don’t want property tax to be a nasty surprise after you buy, the best approach is to model it explicitly in your buy or rent analysis. Use realistic values for taxe_fonciere_annuelle and stress-test different taux_revalorisation_taxe_fonciere_annuelle assumptions.

Simulate your situation on buy-or-rent.net and see, in hard numbers, how property tax and its yearly increases affect your long-term choice between buying and renting.