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Impact of the German Real Estate Transfer Tax on the Commercial Real Estate Market

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  • Frenzel Baudisch, Coletta
  • Dresselhaus, Carolin

Abstract

The tax burden of real estate transactions in Germany increased considerably since the constitutional reform in 2006. We examine the impact of the real estate transfer tax (RETT) on transactions and (net-of-tax) prices of commercial buildings and vacant commercial lots by means of a fixed-effects panel regression. The empirical analysis shows an association of a rise of the RETT by 1% with a decrease of office transactions by up to 0.48% and reduced prices by up to 0.21%. On the market for other commercial properties, transactions and prices decline by 0.17% and 0.19% respectively following a RETT increase. The negative price effects on the commercial real estate market tentatively indicate tax incidence with the seller. In the case of vacant commercial lots, a RETT increase seems to induce an increase of average prices by up to 0.43%, denoting tax incidence with the buyer. We find a negative response to RETT raises of 0.30% for transactions of vacant lots in the data. In addition, we analyze possible neighborhood effects among the states. As for other commercial buildings, an average of a 1% RETT increase in the bordering states of one state is associated with a decrease in the corresponding transactions by 0.46% and a price increase by 0.46%, whereas the prices for vacant commercial lots rise by 0.84%. Hence, the border effect seems to surpass the direct price effect and suggests spatial structural changes in the investment behavior.

Suggested Citation

  • Frenzel Baudisch, Coletta & Dresselhaus, Carolin, 2019. "Impact of the German Real Estate Transfer Tax on the Commercial Real Estate Market," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203494, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc19:203494
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    More about this item

    Keywords

    commercial real estate market; panel regression; real estate transfer tax; share deal;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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