Tax
Transaction costs in Berlin
Property transfer tax in Berlin rises to 6%: second increase in 20 months
From 1 January 2014, Berlin's property transfer tax rises from 5 to 6 percent. It is the second increase in less than two years. What this means for buyers.
Peter Guthmann
Since 1 January 2014, the property transfer tax (Grunderwerbsteuer) in Berlin stands at 6.0 percent. The Senate had raised the rate for the second time within 20 months. The previous increase, from 4.5 to 5.0 percent, took effect in April 2012. The governing coalition of SPD and CDU expected additional revenue of around 100 million euros per year.
A worked example
When purchasing an apartment for 300,000 euros, the tax bill at the end of 2013 was 15,000 euros (5.0%). From January 2014, it rose to 18,000 euros (6.0%). The additional burden: 3,000 euros. Banks generally do not finance transaction costs, so the money must come from the buyer's own equity.
The Senate's rationale
The Senate justified the increase by pointing to persistently high demand in Berlin's property market and strong population growth. The property market, it argued, was a reliable source of revenue for the state budget. The additional income was intended to help consolidate public finances.
Impact on the market
Despite the higher costs for buyers, observers did not expect a drop in demand. In sought-after locations such as Mitte or Prenzlauer Berg, demand continued to outstrip supply by a wide margin. The more pressing question was whether the higher barrier would make it harder for middle income earners to acquire property.
For buy-to-let investors, there was also the question of whether the increased acquisition costs would feed through into rental price calculations for new tenancies.
Property tax as the next step?
With the latest increase in transfer tax, a possible rise in the annual property tax (Grundsteuer) also came into view. This annual levy is part of the service charges that can be passed on to tenants. An increase would therefore burden not only owners but tenants directly. The ongoing market development was closely linked to the Senate's tax policy.