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Heterogeneous price and quantity effects of the real estate transfer tax in Germany

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  • Christofzik, Désirée I.
  • Feld, Lars P.
  • Yeter, Mustafa

Abstract

Using quarterly data for German counties, we study how housing prices and offers respond to higher transaction costs induced by tax increases. Since 2006, states can set their own tax rates on real estate transfers. Several and substantial tax hikes generate variation across time and states which we exploit in our empirical analysis using an event study design. Our results indicate that prices and offers decrease significantly by 3% and 6% already in the quarter in which the tax increase is announced in press but rise subsequently. Furthermore, we find heterogeneous responses when distinguishing between different types of counties. Housing prices decrease persistently in shrinking counties, while this is at most temporarily the case in growing, central and peripheral counties. This implies that the economic incidence of this tax varies across transactions.

Suggested Citation

  • Christofzik, Désirée I. & Feld, Lars P. & Yeter, Mustafa, 2020. "Heterogeneous price and quantity effects of the real estate transfer tax in Germany," Working Papers 10/2020, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    • Handle: RePEc:zbw:svrwwp:102020
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    More about this item

    Keywords

    Real estate transfer tax; real estate prices; housing market; tax incidence; anticipation effects;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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