The Ministry of Finance commissioned a study in 2019 to explore the differentiation of transfer tax between start-ups and investors. This study shows that the new law: 'Law differentiation transfer tax' has limited effectiveness. The report states the following:
The differentiation increases the accessibility of an owner-occupied home for first-time buyers and discourages the purchase of homes as an investment by private investors, but the effect is limited.
We expect there to be 2,500 to 10,000 more transactions per year by first-time buyers (about 4% to 14%) due to differentiation. The main reasons that the transfer tax differentiation has relatively limited effect are:
- investors can easily avoid the higher transfer tax with constructions
- investors and startups compete with each other only in certain areas and on certain properties and;
- in some regions, investors may pass on their higher costs in higher rents. It is further expected that the differentiation of the transfer tax will lead to an increase in the price for homes of first-time buyers of about 1% due to more competition among first-time buyers. Because the effects are relatively small, we estimate that the transfer tax differentiation contributes only a limited amount to solving the problem.
The following was written as a recommendation to the ministry:
Looking beyond effectiveness and efficiency, the study shows that the differentiation of the transfer tax is not a solution to structural problems in the housing market. It causes a shift in demand for housing, while the problem lies in the too limited supply of housing. It also indicates that there is a tension between transfer tax differentiation and the desire for more housing in the middle (rental) segment.
The impact of the differentiation of the transfer tax is overshadowed by other (possible) developments, such as adjustments to the capital gains tax, ECB policy and the possible emergency middle rent button. Our analyses suggest that the issue is likely to be better addressed by policies that pay more attention to regional differences and can anticipate developments in the market more quickly. Specific policies to discourage the conversion of purchase to rental housing may also be of interest.
