Land transfer tax under discussion

Real estate transfer tax is due when a property is purchased. It is a tax levied by the federal states, which can pass it on to the municipalities. Depending on the federal state, the tax rate is between 3.5 percent and 6.5 percent of the purchase price for a house or flat. The land transfer tax currently makes it more difficult for families to purchase residential property.

The federal and state governments are therefore examining a reform of the land transfer tax. This could make the purchase of owner-occupied residential property more favourable in the future. However, there is not yet a timetable for a law to amend the Real Estate Transfer Tax Act. However, the German Bundestag reports that the concrete need for adjustment is already being examined at the federal and state levels.

In the view of several experts, an exemption from real estate transfer tax for first-time home buyers can counteract the problem of often too little equity capital for the purchase of real estate: Ownership is a much cherished wish. Kai H. Warnecke, President of Haus und Grund Deutschland, says that it must be a central goal of government action to create the necessary framework conditions for this. Peter Wegner, Vice-President of the Home Ownership Association, also believes that buying a property is "often the easiest way to build up wealth" and an important pillar of old-age provision. Wegner called for the abolition of land transfer tax on the first purchase. The Kiel Institute for the World Economy also advocates a low land transfer tax. Its analysis shows that private housing construction is stimulated by a low land transfer tax, which is more favourable for the states than financing the same amount of new state construction themselves through higher land transfer tax rates. "Reducing the land transfer tax in the Länder to zero for the first purchase of a property for owner-occupation - that would be progress!", the Taxpayers' Association also believes. "The 33.6 percent drop in real estate transfer tax already in the first four months [of 2023] gives us an idea of the serious gaps that the drastic decline in housing construction will soon tear in the overall economy," comments ZIA President Dr. Andreas Mattner.

In recent years, the real estate transfer tax has been a bubbling source of money and an important source of revenue for the federal states due to steadily rising real estate prices. Some federal states - especially the financially weaker ones - will probably find it difficult to do without it.

(Photo: © Webandi, Pixabay)