Berlin raises property transfer tax to 6%
We reported some weeks ago in REFIRE that the German authorities were shocked to discover that they had miscalculated when processing the results of the 2011 census, which led to overstating the human population of the country by 1.5m residents and understating the amount of buildings and housing available by 500,000. This led to a lot of head-scratching and analysis as to where things went wrong – which was largely attributed to the amount of foreigners who didn’t de-register when they ceased living in Germany, according to the statisticians.
Whether that is the full story or not, the miscalculation has had immediate consequences in Berlin. From the 1st January next year the property acquisition tax in Berlin is being raised from 5% to 6% to compensate for the 180,000 citizens in Berlin who it has now transpired don’t exist. The population of the city was overestimated – it’s now less than we thought it was. The city will now have €470m less in tax income than it thought it would get – and what’s worse, €970m of tax money distributed to Berlin as part of Germany’s equalisation payments scheme from wealthier Länder to the poorer ones, now has to be repaid.
As a sop to angry investors, the Berlin senate is considering introducing a law that would lower the agency commission payable to property brokers from 7% to 6%.
Angela Merkel’s party the CDU had originally opposed the measure, originally proposed by finance minister Ulrich Nussbaum (Independent) as a means of helping to balance the budget by 2015 by bringing in a further €100m annually on top of the existing €700m generated by the tax.. However, last week the CDU quickly capitulated, conceding that without some form of extra taxation the dream of erasing the deficit was unfeasible – and countering with the proposal of reducing brokers’ commissions by law.
Berlin has the lowest level of owner-occupiership of any Germany city, with only about 10% of the population owning their own homes. About half of all Berlin housing transactions – for renting or buying – involve a broker, but (it goes without saying) that all property purchases will now be affected by the new tax. The tax has risen from 2% in 1996 through successive steps (after the German state handed over the setting of the tax to the federal states’ own discretion), to where it was raised only last year from 4.5% to 5%. Berlin has always been the first to raise the property tax, and where Berlin goes, the other federal states invariably follow, with nearly all of them raising their own rates over the past few years. This is the first time the 6% barrier has been reached, but others can be expected to do likewise.
Real estate industry lobbying group ZIA were quick to comment on the new move, with CEO Andreas Mattner saying, “The Berlin senate is obviously trying to make capital out of the housing shortage. Clearly the federal states are taking the view that maximising their income is more important than solving the affordable housing problem.”
Also openly criticising the Berlin decision, Dr. Wulff Aengevelt of Düsseldorf-based Aengevelt Immobilien said the decision would hit the ‘little people’ hardest, in particular young families trying to build wealth and some security by buying their own home. “When this long phase of low interest rates is over and interest rates start rising, then the broader effects on society of these successive rises in the property transfer tax will become even more apparent”, he said.
Aengevelt also criticised what he said was the “easy option” of hitting on property brokers as service providers to claw back some of the extra expense burden on buyers, rather than any of the countless other professionals working in the real estate industry, such as architects, lawyers, valuers, finance providers, and others. “Exclusion and polarisation do nothing but divide up our society, and that can’t be the goal of balanced politics”, he said.