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Transaction Taxes, Capital Gains Taxes and House Prices

Author

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  • Nicole Aregger
  • Martin Brown
  • Enzo Rossi

Abstract

Motivated by the search for instruments to contain future housing bubbles, we examine the impact of transaction taxes and capital gains taxes on residential house price growth. We exploit the variation in taxation across Swiss cantons, as well as within-canton changes in taxation over time. We relate these taxes to house price growth observed for 92 regions of the country during the period 1985 - 2009. Our results suggest that higher taxes on capital gains exacerbate house price dynamics while transaction taxes have no impact on house price growth. These findings support the existence of a lock-in effect of capital gains taxes on housing supply. They further suggest that taxes on real estate capital gains and transaction values are not suitable measures to prevent excessive house price growth.

Suggested Citation

  • Nicole Aregger & Martin Brown & Enzo Rossi, 2013. "Transaction Taxes, Capital Gains Taxes and House Prices," Working Papers 2013-02, Swiss National Bank.
  • Handle: RePEc:snb:snbwpa:2013-02
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How to contain housing bubbles
      by Economic Logician in Economic Logic on 2013-04-26 18:26:00

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    Cited by:

    1. Boysen-Hogrefe, Jens & Gern, Klaus-Jürgen & Groll, Dominik & Jannsen, Nils & Kooths, Stefan & Plödt, Martin & Schwarzmüller, Tim & van Roye, Björn & Scheide, Joachim, 2014. "Finanz- und Wirtschaftspolitik bei einer anhaltenden monetären Expansion," Kieler Beiträge zur Wirtschaftspolitik 5, Kiel Institute for the World Economy (IfW).
    2. 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.
    3. Martin Brown & Benjamin Suman Guin, 2015. "The Exposure of Mortgage Borrowers to Interest Rate Risk and House Price Risk – Evidence from Swiss Loan Application Data," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 151(II), pages 3-37, June.
    4. Kuttner, Kenneth N. & Shim, Ilhyock, 2016. "Can non-interest rate policies stabilize housing markets? Evidence from a panel of 57 economies," Journal of Financial Stability, Elsevier, vol. 26(C), pages 31-44.
    5. Essi Eerola, 2017. "Macroprudential measures in the housing markets - A note on the empirical literature," Journal of Risk Finance, Emerald Group Publishing, vol. 18(3), pages 326-335, May.
    6. Brown, Martin & Guin, Benjamin, 2015. "The Exposure of Mortgage Borrowers to Interest Rate Risk, Income Risk and House Price Risk – Evidence from Swiss Loan Application Data," Working Papers on Finance 1509, University of St. Gallen, School of Finance.
    7. Stijn Claessens, 2015. "An Overview of Macroprudential Policy Tools," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 397-422, December.
    8. Armstrong, Jed & Skilling, Hayden & Yao, Fang, 2019. "Loan-to-value ratio restrictions and house prices: Micro evidence from New Zealand," Journal of Housing Economics, Elsevier, vol. 44(C), pages 88-98.
    9. Jed Armstrong & Hayden Skilling & Fang Yao, 2018. "Loan-to-Value Ratio Restrictions and House Prices," Reserve Bank of New Zealand Discussion Paper Series DP2018/05, Reserve Bank of New Zealand.

    More about this item

    Keywords

    House prices; Transaction tax; Capital gains tax; Macroprudential policy;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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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