How Do Stamp Duties Affect the Housing Market?

15 Pages Posted: 14 Sep 2013

See all articles by Ian Davidoff

Ian Davidoff

International Monetary Fund (IMF)

Andrew Leigh

Australian House of Representatives Parliament House; Centre for Applied Macroeconomic Analysis, ANU; IZA

Multiple version iconThere are 2 versions of this paper

Date Written: September 2013

Abstract

Land transfer taxes are a substantial portion of the cost of moving house in many developed countries. Because stamp duties are endogenous with respect to the house price, we create an instrumental variable that is the stamp duty on a property, based on the starting house price in the relevant postcode and the national house price trend. In a specification with postcode and year fixed effects, this instrument effectively captures policy changes and non‐linearities in the stamp duty schedule. We find that the impact of an increase in the tax rate is to lower house prices suggesting that the economic incidence of the tax falls on the seller. We also observe impacts of stamp duty on housing turnover. A 10 per cent increase in stamp duty lowers turnover by 3 per cent in the first year, and by 6 per cent if sustained over a 3‐year period.

Suggested Citation

Davidoff, Ian and Leigh, Andrew, How Do Stamp Duties Affect the Housing Market? (September 2013). Economic Record, Vol. 89, Issue 286, pp. 396-410, 2013, Available at SSRN: https://ssrn.com/abstract=2325732 or http://dx.doi.org/10.1111/1475-4932.12056

Ian Davidoff (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Andrew Leigh

Australian House of Representatives Parliament House ( email )

Canberra, 2600
Australia

Centre for Applied Macroeconomic Analysis, ANU ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

IZA ( email )

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
550
PlumX Metrics