The Impact of Taxes on Housing Prices: A Detailed Analysis

In the real estate sector, it is widely recognised that the tax burden has a significant impact on the final price of a property. Various studies have indicated that taxes can represent up to 25% of the total cost of a property, which is a determining factor in the accessibility and affordability of the real estate market.

How is the Tax Burden Distributed in the Real Estate Sector?

The tax burden on housing is not limited to a single tax, but accumulates throughout the entire real estate process, from the acquisition of land to the final sale to the buyer. This process involves multiple taxes and fees, which include:

Taxes on the purchase of land: The acquisition of land by developers and even the final owner, involves specific taxes that increase the initial cost of the project. In the case of a company selling a plot of land there is a 21% VAT, if it is another company, it can be deducted, but for a private individual, it is more complicated.
Taxes and fees during construction: Throughout the development of the project, developers must pay various taxes, such as VAT on construction materials and municipal fees for building and urbanisation licences.
Taxes at the time of sale: When the property is sold, taxes such as Transfer Tax (ITP) in the case of second-hand homes or VAT on new homes are applied, as well as other notary and registry fees that increase the final price for the buyer.
Recurrent taxes for homeowners: Even after the purchase, homeowners must face taxes such as Real Estate Tax (IBI) and, in some cases, municipal capital gains at the time of a future sale.

The Need for a Review of the Housing Tax Model

Given that the tax burden represents a substantial part of the price of housing, it is essential that public administrations reconsider the current tax structure. A strategic reduction of certain taxes could facilitate access to housing for a greater number of citizens, especially in a context where rising prices make it difficult for many families to purchase property.

Moreover, an excessive tax burden can discourage investment in the real estate sector, affecting not only developers and builders, but also urban development and economic growth in general. A balanced review of these taxes would therefore help to foster a more dynamic and accessible market.

A Call for Public-Private Sector Collaboration

As real estate professionals, we advocate close collaboration between the private sector and public authorities to find solutions that balance the need for tax revenues with citizens’ right to affordable housing.

Only through a joint approach, with more flexible tax policies and well-planned development strategies, can we ensure a fair, accessible and sustainable housing market for all. Reducing certain tax burdens, together with incentives for affordable housing development, could be a key step towards solving the current challenges in access to housing.

In short, it is time to rethink the impact of taxation on the housing sector and work towards a system that benefits both buyers and developers, promoting balanced and equitable growth in the housing market.