Who Bears the Burden of Real Estate Transfer Taxes? Evidence from the German Housing Market

35 Pages Posted: 26 Jan 2021

See all articles by Mathias Dolls

Mathias Dolls

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute; IZA Institute of Labor Economics

Clemens Fuest

ifo Institute – Leibniz Institute for Economic Research at the University of Munich; Ludwig-Maximilians-University, Munich; Center for Economic Studies (CES)

Carla Krolage

ifo Institute

Florian Neumeier

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Date Written: 2021

Abstract

This paper examines the effects of real estate transfer taxes (RETT) on property prices using a rich micro dataset of roughly 17 million German properties for the period from 2005 to 2019. We exploit a 2006 constitutional reform that allows states to set their own RETT rates, leading to frequent increases in states’ tax rates in the subsequent years. Our monthly event study estimates indicate a price response that strongly exceeds the change in the tax burden for single transactions. Twelve months after a reform, a one percentage point increase in the tax rate reduces property prices by on average 3%. Effects are stronger for apartments and apartment buildings than for single-family houses. Moreover, negative price effects are predominantly found in growing housing market regions. Our results can be rationalized by a theoretical model that predicts larger price responses in sellers’ markets and for properties with a high transaction frequency.

JEL Classification: H220, H710, R320, R380

Suggested Citation

Dolls, Mathias and Fuest, Clemens and Krolage, Carla and Neumeier, Florian, Who Bears the Burden of Real Estate Transfer Taxes? Evidence from the German Housing Market (2021). CESifo Working Paper No. 8839, Available at SSRN: https://ssrn.com/abstract=3770461

Mathias Dolls (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

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Germany

HOME PAGE: http://www.cesifo-group.de/ifoHome/CESifo-Group/ifo/ifo-Mitarbeiter/cvifo-dolls_m.html

IZA Institute of Labor Economics ( email )

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Clemens Fuest

ifo Institute – Leibniz Institute for Economic Research at the University of Munich

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Munich, DE 81679
Germany
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Ludwig-Maximilians-University, Munich ( email )

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Germany

Center for Economic Studies (CES) ( email )

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Carla Krolage

ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Florian Neumeier

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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