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Halle (Saale). The German state has so far been unable to take any action against the overvaluations in the real estate market. This is the result of an analysis by the Leibniz Institute for Economic Research Halle (IWH).
In particular, the effect of the property transfer tax was examined. Although a one percentage point increase in this tax in Germany leads to a 1.2% drop in the price of residential property, economists have been able to demonstrate this effect mainly in rural areas, but hardly and only with a delay in the cities. “Especially where the overheated housing market is greatest, the tax lets us down,” Michael Koetter, vice president and head of the financial markets department at IWH, said Wednesday. For the study, the institute evaluated 33 million real estate advertisements that appeared on the Immobilienscout24 portal between 2007 and 2017.
Since the property transfer tax was raised to varying degrees in the individual federal states at different times, economists were able to pinpoint the effects, according to their own statements. According to financial market researcher Koetter, it’s risky if too many banks have too many overvalued real estate loans on their balance sheets. “We need tools that start directly with the banks,” Koetter said. These tools, such as lending restrictions, should be further developed at the European level.
To this end, the powers of the European institutions need to be strengthened and the European banking union completed. Difficulties in the German housing market could further exacerbate an economic crisis. More corporate bankruptcies and steep price hikes increase the risk that private individuals will default on loans for their residential properties. This can weaken financial stability, which in turn can create or exacerbate an economic crisis, the researchers said.
Home loans make up a large part of both German bank loans and private debt.
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