The Impact of a Rise in the Real Estate Transfer Taxes on the French Housing Market

Guillaume Bérard and Alain Trannoy

No 1732, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: This paper estimates the effects of an increase in the real estate transfer taxes (RETT) rate from 3.80% to 4.50%, following an optional reform implemented in March 2014 by French départements. Not all the départements implemented the RETT increase, which is the starting point for a natural experiment: using a difference-in-differences design, we estimate two main effects. (1) An anticipation effect a month before the implementation of the reform in order to avoid the RETT increase (timing response). The total tax base increased by 28% just the month before. (2) The classic depressing effect of a tax on the equilibrium quantity (extensive margin response) is estimated to be 7% on average from March 2014 to October 2015. All in all, the average net effect corresponds to a drop of the transactions of 4.6% over a period of ten months following the implementation date. Furthermore, we estimate that the elasticity of the tax revenue to the tax increase is about 0.65, meaning that départements’ tax revenues are still on the increasing side of the Laffer curve.

Keywords: local government; real estate market; transfer taxes; Natural experiment; anticipation (search for similar items in EconPapers)
JEL-codes: H71 R21 R31 R51 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2017-09
New Economics Papers: this item is included in nep-pbe and nep-ure
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Citations: View citations in EconPapers (3)

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Working Paper: The Impact of a Rise in the Real Estate Transfer Taxes on the French Housing Market (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1732

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