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Housing Market Responses to Transfer Taxes: Evidence from a French Reform

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  • Mathilde POULHES

    (CREST, SDES (Ministry of Housing), Insee and SciencesPo (Paris))

Abstract

This paper estimates the impact of the rise in the housing transfer tax (the régime de droit commun) in France in 2014. It exploits both time and geographical discontinuities in the implementation of this reform that gave the right to local authorities to raise their housing transfer tax, an entitlement that most départements have chosen to exercise. In the short term, I provide evidence that buyers anticipated the reform to avoid the additional tax burden. I then use an event-study design to examine whether there was any lock-in effect in the volume of dwelling sales. I show there is evidence of a long-term negative effect of the tax increase on the number of transactions, but only in markets where supply was high relative to demand. Finally, I find no effect on pre-tax sale prices, meaning that the burden of the transfer tax rests now on the buyer. My findings highlight the price rigidity of the French housing market and suggest that lowering housing transfer taxes could be used as a fiscal stimulus in the short term.

Suggested Citation

  • 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.
  • Handle: RePEc:crs:wpaper:2020-23
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    References listed on IDEAS

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    1. 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.
    2. Besley, Timothy & Meads, Neil & Surico, Paolo, 2014. "The incidence of transaction taxes: Evidence from a stamp duty holiday," Journal of Public Economics, Elsevier, vol. 119(C), pages 61-70.
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