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Price and Quantity Effects of the German Real Estate Transfer Tax

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  • Kunka Petkova
  • Alfons J. Weichenrieder
  • Alfons Weichenrieder

Abstract

This paper analyzes the tax effects of the German real estate transfer tax (RETT). While the vast majority of single-family houses in Germany are owner-occupied, apartments are usually held by private and incorporated investors. For this reason, we conducted a regression analysis to determine the effects of increasing RETT on the number and the prices of transactions separately for these two market segments. Our findings suggest that increasing the RETT by 1% is associated with a decline in transactions by 0.23% for single-family houses, but with no significant effect on the prices of traded houses. Conversely, for apartments, we find no significantly negative effects on the transactions, but the price effect of the RETT tends to be negative. Finally, for vacant lots, we find even larger quantity effects than for single-family houses suggesting roughly an elasticity of -1. The results for this specific market segment indicate that the government operates near the top of a Laffer curve.

Suggested Citation

  • Kunka Petkova & Alfons J. Weichenrieder & Alfons Weichenrieder, 2017. "Price and Quantity Effects of the German Real Estate Transfer Tax," CESifo Working Paper Series 6538, CESifo.
  • Handle: RePEc:ces:ceswps:_6538
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    Cited by:

    1. Clemens Fuest & Mathias Dolls & Carla Krolage & Florian Neumeier & Carla Krolage, 2019. "Who Bears the Burden of Real Estate Transfer Taxes? Evidence from the German Housing Market," ifo Working Paper Series 308, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    2. Petkova, Kunka & Weichenrieder, Alfons, 2017. "Reformpläne bei der Grunderwerbsteuer," SAFE Policy Letters 61, Leibniz Institute for Financial Research SAFE.
    3. Lars Vandrei, 2018. "Does Regulation Discourage Investors? Sales Price Effects of Rent Controls in Germany," ifo Working Paper Series 262, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    4. Buettner Thiess & Krause Manuela, 2018. "Föderalismus im Wunderland: Zur Steuerautonomie bei der Grunderwerbsteuer," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 19(1), pages 32-41, March.
    5. Carolin Fritzsche & Lucas Rohleder, 2017. "Effekte von Änderungen der Grunderwerbsteuer – Ein Überblick über die Ergebnisse internationaler Studien," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 24(05), pages 09-14, October.
    6. Bofinger, Peter & Feld, Lars P. & Schmidt, Christoph M. & Schnabel, Isabel & Wieland, Volker, 2018. "Vor wichtigen wirtschaftspolitischen Weichenstellungen. Jahresgutachten 2018/19," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201819.
    7. Markus Hertrich, 2019. "A Novel Housing Price Misalignment Indicator for Germany," German Economic Review, Verein für Socialpolitik, vol. 20(4), pages 759-794, November.
    8. Carla Krolage & Carla Krolage, 2020. "The Effect of Real Estate Purchase Subsidies on Property Prices," ifo Working Paper Series 333, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    9. Mathilde POULHES, 2020. "Housing Market Responses to Transfer Taxes: Evidence from a French Reform," Working Papers 2020-23, Center for Research in Economics and Statistics.
    10. Krause, Manuela & Büttner, Thiess, 2017. "Does Fiscal Equalization Lead to Higher Tax Rates? Empirical Evidence from Germany," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168214, Verein für Socialpolitik / German Economic Association.
    11. Christofzik, Désirée I. & Feld, Lars P. & Yeter, Mustafa, 2020. "Heterogeneous price and quantity effects of the real estate transfer tax in Germany," Freiburg Discussion Papers on Constitutional Economics 20/10, Walter Eucken Institut e.V..
    12. Leo Kaas & Georgi Kocharkov & Edgar Preugschat & Nawid Siassi, 2021. "Low Homeownership in Germany—a Quantitative Exploration," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 128-164.
    13. Thiess Büttner, 2017. "Welfare Cost of the Real Estate Transfer Tax," CESifo Working Paper Series 6321, CESifo.
    14. Manuela Krause, 2019. "Empirical essays on fiscal federalism and political economy in Germany," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 84.
    15. Fritzsche, Carolin & Vandrei, Lars, 2019. "The German real estate transfer tax: Evidence for single-family home transactions," Regional Science and Urban Economics, Elsevier, vol. 74(C), pages 131-143.
    16. Manuela Krause & Niklas Potrafke, 2020. "The Real Estate Transfer Tax and Government Ideology: Evidence from the German States," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 76(1), pages 100-120.
    17. 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.
    18. Thomsen, Stephan L & Vogt, Daniel & Brausewetter, Lars, 2019. "Wohnungsmarkt und Wohnungspolitik in Deutschland: Situation und Optionen," Hannover Economic Papers (HEP) dp-658, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    19. Petkova, Kunka & Weichenrieder, Alfons J., 2019. "Grunderwerbsteuer: Eine Steuer für das 21. Jahrhundert?," SAFE White Paper Series 58, Leibniz Institute for Financial Research SAFE.
    20. Koetter, Michael & Marek, Philipp & Mavropoulos, Antonios, 2021. "Real estate transaction taxes and credit supply," Discussion Papers 04/2021, Deutsche Bundesbank.
    21. Thiess Büttner, 2017. "Die volkswirtschaftlichen Zusatzkosten der Grunderwerbsteuer," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 24(01), pages 25-28, February.
    22. Stefanie Braun, 2021. "Effects of Preferential Tax Treatment on German Homeownership," Working Papers 209, Bavarian Graduate Program in Economics (BGPE).
    23. Frenzel Baudisch, Coletta & Dresselhaus, Carolin, 2018. "Impact of the German real estate transfer: Tax on the commercial real estate market," Finanzwissenschaftliche Arbeitspapiere 100, Justus Liebig University Giessen, Fachbereich Wirtschaftswissenschaften.

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    More about this item

    Keywords

    real estate transaction tax; stamp duty; housing market; taxation; financial transaction tax;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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