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The reality of Germany’s sweeping Grundsteuer reform has now come into sharp focus for millions of property owners—and the verdict is clear: most are paying significantly more than before. Far from delivering the “revenue-neutral” overhaul once promised by Olaf Scholz, the reform has led to large-scale increases in property tax bills across the country.
The reform was introduced following a 2018 ruling by the Federal Constitutional Court, which found the old property tax valuations unconstitutional because they were based on outdated decades-old values, requiring a complete overhaul of the system.
A study by the property owners' association Haus & Grund shows that in 79% of cases, property tax has either risen or stayed the same. Only 21% of owners are paying less, and even then the reductions are relatively modest. Separate data from Buhl Data’s Wiso survey of 46,000 property owners broadly confirm the trend: two-thirds reported an increase, with nearly half describing the reform as unfair.
Municipal rates: the hidden cost driver
The burden has not risen evenly. Owners of single-family and two-family homes have seen average increases of between 119% and 139%, while multi-family property owners face rises between 111% and 143%. Condominiums have fared better, but even here, average increases range from 40% to 96%. Tenants, too, are beginning to feel the secondary effects as landlords seek to pass on at least part of the new costs.
The principal driver of these higher bills is not just the revaluation of properties, but the widespread adjustment of assessment rates (Hebesätze) by municipalities. According to Haus & Grund, 69% of owners report an increase in their local assessment rate, with only 22% seeing a reduction. Municipalities, facing their own fiscal pressures, have largely ignored federal exhortations to keep overall revenue stable. The result has been a quiet but profound shift of the tax burden onto private property owners.
Regional disparities are stark. In Berlin, the average property tax increase is reported at 117%, while owners in Schleswig-Holstein have faced more moderate rises of around 55%. Variations also exist between federal models and Länder-specific variants, but statistical analyses suggest that the decisive factor remains how aggressively individual municipalities have adjusted their rates. In this context, differences between valuation models—whether value-based, area-based, or land-value models—are less influential than local political decisions.
Political fallout and investor impact
Political fallout is gathering pace. Haus & Grund President Kai Warnecke has accused cities of being the “number one cost driver” and making housing more expensive. He has called for a fundamental rethink by the next federal government. The government itself continues to insist that it is pursuing “an overall revenue-neutral implementation,” while suggesting that municipalities were urged to moderate their tax rate adjustments. Few observers believe that such moderation has been consistently applied.
The implications for investors are serious. Higher operating costs are putting pressure on net initial yields, particularly in residential portfolios. In grocery-anchored retail, where margins are often tight, the additional tax burden could start to impact acquisition strategies and valuation models. Due diligence exercises are already being expanded to factor in Hebesatz trends at the municipal level, with investors scrutinising local government budgets and political stability more closely than before.
Early signs suggest that a “reform of the reform” may emerge as a political issue in the next electoral cycle, particularly if appeals against tax assessments continue to mount. For now, however, the reality for property owners is that the cost of holding real estate in Germany has risen sharply—and trust in political assurances about tax stability has been severely eroded.