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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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    References listed on IDEAS

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    Blog mentions

    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. Stijn Claessens, 2015. "An Overview of Macroprudential Policy Tools," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 397-422, December.
    2. 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).
    3. Carolin Fritzsche & Lars Vandrei, 2016. "The German Real Estate Transfer Tax: Evidence for Single-Family Home Transactions," ifo Working Paper Series 232, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    4. 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.
    5. 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.
    6. Eerola, Essi, 2016. "Macroprudential measures and housing markets: a note on the empirical literature," Research Discussion Papers 18/2016, Bank of Finland.
    7. 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.

    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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