Heterogeneous effects of the decrease in property transfer taxes on the owner-occupied housing market in the Netherlands

After the global financial crisis, housing markets became dysfunctional. Many countries reformed their housing policies to improve housing market conditions. Among other reforms, the Dutch government decreased the property transfer tax to stimulate the owner-occupied housing market. It is well documented that taxes levied on the sale or purchase of a house have negative impacts on the number of sales and housing prices. However, in many studies it is assumed that these effects are general for the whole owner-occupied housing market. This study investigates the heterogeneous effects of the decrease in property transfer taxes on the number of sales between different segments of the Dutch owner-occupied housing market. The data show that there are significant differences in transaction volumes after the decrease in PTT in different market segments, based on e.g. transaction prices, floor space, transaction prices per square meter. This suggests that the decrease in property transfer taxes has immediate policy implications. The associated welfare gains of decreasing the property transfer tax are mostly transferred to the lower end of the housing market.