How Do Taxation and Regulation Affect the Real Estate Market?

BIG-DATA-BASED ECONOMIC INSIGHTS

Mathias Dolls, David Gstrein, Carla Krolage, Florian Neumeier

The following article provides an overview of four projects that assess the effects of regulation and taxation as well as the pandemic’s impact on the German real estate market, using large-scale property price as well as survey data. The projects aim to provide answers to the following questions: Do subsidies make housing purchases more affordable? How do real estate transfer taxes affect house prices? How does rent regulation such as the Berlin rent cap affect the real estate market? And, which future trends in the housing market can be expected given the pandemic’s potentially long-lasting impacts on residential preferences?

Key Messages

  • Rent caps can have significant unintended consequences through lower housing supply
  • Instead of making housing more affordable, purchase subsidies have provided a windfall for sellers
  • The real estate transfer tax levied on properties’ purchase price substantially decreases property prices
  • The Covid-19 pandemic may leave long-lasting impacts on Germany’s housing market
  • Policymakers would be well advised to take into account such trends and side effects when formulating policy
Citation

Mathias Dolls, David Gstrein, Carla Krolage and Florian Neumeier: “How Do Taxation and Regulation Affect the Real Estate Market?,” EconPol Forum 23 (6), CESifo, Munich, 2022.