Price and Quantity Effects of the German Real Estate Transfer Tax

34 Pages Posted: 20 Jul 2017

See all articles by Kunka Petkova

Kunka Petkova

Vienna University of Economics and Business

Alfons J. Weichenrieder

Goethe University Frankfurt - Department of Applied Econometrics and International Economic Policy; Vienna University of Economics and Business; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: June 29, 2017

Abstract

This paper analyzes the tax effects of the German real estate transfer tax (RETT). While the vast majority of single-family houses in Germany are owner-occupied, apartments are usually held by private and incorporated investors. For this reason, we conducted a regression analysis to determine the effects of increasing RETT on the number and the prices of transactions separately for these two market segments. Our findings suggest that increasing the RETT by 1% is associated with a decline in transactions by 0.23% for single-family houses, but with no significant effect on the prices of traded houses. Conversely, for apartments, we find no significantly negative effects on the transactions, but the price effect of the RETT tends to be negative. Finally, for vacant lots, we find even larger quantity effects than for single-family houses suggesting roughly an elasticity of -1. The results for this specific market segment indicate that the government operates near the top of a Laffer curve.

Keywords: real estate transaction tax, stamp duty, housing market, taxation, financial transaction tax

JEL Classification: H240, R210

Suggested Citation

Petkova, Kunka and Weichenrieder, Alfons J., Price and Quantity Effects of the German Real Estate Transfer Tax (June 29, 2017). CESifo Working Paper Series No. 6538. Available at SSRN: https://ssrn.com/abstract=3004387

Kunka Petkova

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Alfons J. Weichenrieder (Contact Author)

Goethe University Frankfurt - Department of Applied Econometrics and International Economic Policy ( email )

United States

HOME PAGE: http://www.uni-frankfurt.de/fb02/weichenrieder/

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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

Poschinger Str. 5
Munich, DE-81679
Germany

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