It is a tiresome topic for many real estate buyers: the real estate transfer tax.

Once the purchase contract for a property or land has been signed, it doesn't take long for the letter from the tax office to arrive.

Depending on the federal state, buyers have to transfer between 3.5 and 6.5 percent of the purchase price to the tax authorities.

For a house worth 500,000 euros, that is up to 32,500 euros.

In addition to the brokerage costs, the real estate transfer tax makes up the majority of the additional purchase costs.

Julia Loehr

Business correspondent in Berlin.

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For years it has been discussed whether and how politics could relieve real estate buyers at this point.

However, little has happened.

This is also due to the fact that the real estate transfer tax is a pretty attractive source of income for the federal states.

A survey by the FAZ among the 16 federal states shows that the income of the states from this tax has increased by almost half (plus 47.6 percent) since 2016.

At the end of 2016 they totaled 12.4 billion euros, five years later it was 18.3 billion euros.

NRW with the most income

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.

Bavaria and Baden-Württemberg follow with sums of around 2.5 billion euros.

In a total of six federal states, the revenue from real estate transfer tax exceeded the billion mark last year.

The largest percentage increases were recorded in several eastern federal states.

In Brandenburg – plus 84 percent, the tax rate has remained unchanged at 6.5 percent since 2015 – the influx of many Berliners is likely to be a reason.

Up until 2006, the federal government determined the amount of the real estate transfer tax.

The tax rate at that time was 3.5 percent.

Since the countries have been allowed to set the percentage individually, many have turned the tax screw heavily.

Brandenburg, North Rhine-Westphalia, Saarland, Schleswig-Holstein and Thuringia currently form the top group with 6.5 percent.

Only Bavaria and Saxony have remained at the original 3.5 percent - which they like to emphasize.

"The path into your own four walls is a very important contribution to old-age provision," says Bavaria's Finance Minister Albert Füracker (CSU).

With rising real estate prices, the incidental acquisition costs also increased.

This makes it even more difficult to finance a property.

"Bavaria rejects an increase in the real estate transfer tax rate, as recently decided in Hamburg," says Füracker.

Lower tax rate for young families

In fact, changes are brewing in the north.

Hamburg wants to increase its tax rate from 4.5 to 5.5 percent on January 1, 2023.

That should bring an additional 132 million euros a year.

This is a reaction to the tense budgetary situation after the corona pandemic, Finance Senator Andreas Dressel (SPD) justified the unpopular step.

At the same time, he promised improvements for certain groups of buyers.

The Hanseatic city would like to reduce the tax rate to 3.5 percent for young families and buyers of social housing and leasehold land - provided that the federal government creates the legal prerequisites for this.

The black-yellow coalition in North Rhine-Westphalia is also demanding an opening clause via a development application in the Bundesrat.

The aim is to introduce an exemption for the purchase of owner-occupied single-family houses, two-family houses or condominiums and for the acquisition of undeveloped land by private individuals, as a spokesman for the Ministry of Finance in Düsseldorf explains.

According to the ideas of the state, this exemption should be uniform nationwide.

For the time being, the North Rhine-Westphalian state parliament has decided on a 400 million euro funding program.

This is intended to relieve owner-occupiers who have bought since January 1, 2022.

But who gets how much money is not yet clear, which the opposition in the state parliament criticizes.

According to the current legal situation, the federal states can only set the amount of the tax rate.

The coalition agreement between the SPD, the Greens and the FDP states: “We want to enable the federal states to make real estate transfer tax more flexible, for example with an exemption amount, to make it easier to purchase owner-occupied housing.” This is to be financed by fewer exceptions for companies.

So far, they have often been able to avoid the tax through so-called share deals.

But there are no concrete plans for changes in the Federal Ministry of Finance.

"We are currently examining how a more flexible design can be regulated," said a spokeswoman.

Real estate prices continue to rise

Relief for real estate buyers is therefore unlikely in the near future, on the contrary.

According to data from the analysis company Empirica, real estate prices and thus the basis for real estate transfer tax continued to rise in the first quarter.

The prices for condominiums were therefore 11.5 percent higher than in the first quarter of 2021. Single and two-family houses even rose by 13.7 percent within a year.

The prices in rental advertisements, on the other hand, increased by only 4.4 percent during this period.

A further complication for prospective buyers is that interest rates on real estate loans have risen significantly in recent weeks.

For a long time, interest rates were below 1 percent, but now the banks are charging more than 2 percent again in many cases, and the trend is rising.

In no other EU country so few people live in a property that belongs to them as in Germany.

According to the European Statistical Office, the proportion of owners in 2020 was just over 50 percent.

In contrast, the EU average was around 70 percent.

In Eastern Europe in particular, but also in countries such as Spain and Italy, owning your own property is the norm.

Renting in Europe is only more popular in non-EU country Switzerland than in Germany.

There, the proportion of owners was recently only 42 percent.

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