Why real estate transfer taxes are so high


This is a tedious subject for many real estate buyers: real estate transfer taxes. Once the contract for the purchase of a property or land has been signed, the letter from the tax authorities does not take long to arrive. According to the federal state, buyers must transfer between 3.5 and 6.5% of the purchase price to the tax authorities. For a house worth 500,000 euros, that’s up to 32,500 euros. In addition to brokerage fees, real estate transfer duties thus represent the majority of ancillary costs to the purchase.

For years there have been discussions about whether and how politicians could ease the burden on home buyers in this area. However, little happened. One of the reasons for this is that the real estate transfer tax is a rather attractive source of revenue for the Länder. An FAZ survey of the 16 German states shows that state revenues from this tax have increased by almost half (more than 47.6%) since 2016. While they amounted to 12.4 billion euros at the end of 2016, five years later, the figure was already 18.3 billion euros.

The absolute leader is North Rhine-Westphalia, with revenues of more than 4.1 billion euros in 2021. The state is the most populous federal state in Germany. It is followed by Bavaria and Baden-Württemberg with sums of around 2.5 billion euros. In a total of six German Länder, revenue from the tax on real estate transfers exceeded the threshold of one billion euros last year. The largest percentage increases were recorded in several eastern states. In Brandenburg – up 84%, with a tax rate unchanged at 6.5% since 2015 – the influx of many Berliners is likely one reason.

Until 2006, the federal government determined the amount of property transfer tax. At that time, the flat tax rate was 3.5%. Since the federal states were allowed to set the percentage rate individually, a number of them made significant changes to the tax rate. With 6.5%, Brandenburg, North Rhine-Westphalia, Saarland, Schleswig-Holstein and Thuringia are currently in the lead. Only Bavaria and Saxony remained at the old 3.5% – something they also like to point out.

“Being within its own four walls is a very important contribution to old-age provision”, says Bavarian Finance Minister Albert Füracker (CSU). With the rise in real estate prices, incidental acquisition costs have also increased. This makes it even more difficult to finance a property. “An increase in the real estate transfer tax rate, as currently decided in Hamburg, is rejected by Bavaria,” Füracker said.

In fact, changes are afoot in the North. Hamburg wants to increase its tax rate from 4.5 to 5.5% on January 1, 2023. This should generate an additional 132 million euros per year. This is in response to the tight budgetary situation following the Corona pandemic, said Senator for Finance Andreas Dressel (SPD), explaining the unpopular measure. At the same time, it held out the prospect of improvements for certain groups of buyers. The Hanseatic city wants to reduce the tax rate to 3.5% for young families as well as for buyers of social housing and hereditary building land – provided that the federal government creates the legal conditions for this.

The black-yellow coalition of North Rhine-Westphalia is also demanding an opening clause via a development motion in the Bundesrat. The aim is to introduce a premium for the purchase of single-family homes, two-family homes or owner-occupied condominiums and for the purchase of land not built on by individuals, as explained by a ministry spokesperson. of Finance in Düsseldorf. According to the ideas of the state, this allocation should be uniform throughout Germany. So far, the state parliament of North Rhine-Westphalia has approved a subsidy program of 400 million euros. This is to relieve homeowners who have bought since January 1, 2022. However, it is not yet clear who will receive how much money, a fact criticized by the opposition in the state parliament.

In the current legal situation, the Länder can only set the level of the tax rate. The government agreement of the SPD, the Greens and the FDP clearly states: “We want to allow the states to relax the property transfer tax, for example by means of a tax allowance, in order to facilitate the acquisition of property . occupied residential property. This must be funded by fewer exemptions for businesses. So far, they have often been able to avoid tax through so-called equity agreements. But there are as yet no concrete plans for change within the Federal Ministry of Finance. “How a more flexible arrangement can be regulated is currently under consideration,” a spokeswoman said.

Soon relief for property buyers is therefore unlikely, on the contrary. According to data from the analyst firm Empirica, real estate prices and therefore the base for real estate transfer tax continued to increase in the first quarter. According to the data, condominium prices were 11.5% higher than in the first quarter of 2021, while single and two-family homes became even more expensive by 13.7% in one year.

The prices in rental advertisements rose during this period against it only by 4.4 per cent. For prospective buyers, the fact that mortgage interest rates have risen sharply in recent weeks is an aggravating factor. For a long time, interest rates were below 1%, but now banks are charging more than 2% again in many cases, and the trend is going up.

In no other EU country do fewer people live in a property they own as in Germany. According to the European Statistical Office, the proportion of owners in 2020 was just over 50%. In contrast, the EU average was around 70%. Owning your own property is the norm in Eastern Europe in particular, but also in countries like Spain and Italy. Renting in Europe is only more popular than in Germany in the non-EU country of Switzerland. There, the proportion of owners was only 42% recently.

Pictures of Tierra Mallorca


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