House prices and immovable property tax: Evidence from OECD countries

Abstract

This paper studies the impact of changes in immovable property tax revenues on the growth rate of house prices by analysing a panel of 34 OECD countries over the period 1970–2014. Starting from the annual series of immovable property tax revenues, we isolate years of significant shifts in the property tax regime and study their impact on house prices. We find a strong negative relationship between increases in immovable property tax revenues and house prices. This relationship is robust to the inclusion of cyclical determinants of house prices, country and year fixed effects, and country‐specific linear trends. We also propose an instrumental variable strategy based on countries’ legal origins that confirms a statistically significant negative impact of such taxes in the short run.

Property Taxes and Growth Patterns in China: Multiple Causal Inference Methods

“…Moreover, buyers will make a trade-off between house prices and public services, and property taxes may increase the house prices by funding public spending (Arik, 2021 ; Carrillo et al, 2021 ). Other researchers have reported that property taxes can effectively decrease house prices (Angjellari-Dajci et al, 2015 ; Oliviero et al, 2019 ; Bø, 2020 ; Li et al, 2020 ; Zhu and Johnson, 2020 ; Giertz et al, 2021 ). The capitalization equation clearly illustrates the mechanism underlying this effect:…”

Housing Sustainability: The Effects of Speculation and Property Taxes on House Prices within and beyond the Jurisdiction

“…Previous studies have adopted various approaches to determine the influence of taxation on house price volatility. Most studies have used policies related to transaction or retention links of housing and aggregate national-scale data to assess policy implications on housing prices [56,57]. In addition, they have either framed the analysis in the context of market distortion [47,49,52,58,59], analyzing investment behavior [60,61], or cost-value analysis [62,63].…”

“…Many empirical studies have indicated that both transaction and transfer links have significant explanatory power for price differences before and after the implementation of taxes. However, limited studies [57,64] have adopted the aggregate impact of both forms of tax policies and have analyzed price variation between cities. Furthermore, national-and provincial-scale aggregate data, ignoring intercity demand and supply heterogeneity, will limit the strength of a conclusion [53,65].…”

“…In addition to a combination of tax policies, geographical variation of tax instruments, qualification, and spillover effect will alter the aggregate outcome [80]. Very few studies have attempted to assess the aggregate outcome of policies on retention and transfer links of housing transactions [57,61,80]. However, studies that have attempted cumulative assessment were limited to one city or multiple cities from geographically disconnected regions.…”