Transfer Tax and the Dutch Housing Market

Transfer Tax is tax payable when becoming the legal or economic owner of a property, be it a house with a garden, an apartment, shed or garage, shop or office.

The basis for the calculation of the tax to be paid is the purchase price of the property. This summer the Dutch Government decided to reduce the transfer tax from 6% to 2% for houses and apartments. This is a temporary measure extending until 1^st July of 2012. Home buyers can thus benefit from this tax reduction if property completion takes place at a Civil Law Notary's office before this date.

Consumer confidence is currently low and people's faith in the housing market and the economy may be even lower. A lot of people are worried about losing their jobs and this is delaying their decision concerning whether and/or when to buy a new house. Their understandable anxiety is that it might be difficult to sell their old house. This has meant that the train of buying and selling has gradually ground to a halt. The Government now wants to give the housing market a boost, since a stalled housing market has a disastrous effect on both employment and on the economy generally. Many people earn their daily living in the real estate market: real estate agents, mortgage brokers and bankers, builders, moving companies, painters, kitchen and bathroom manufacturers etc. So a boost to the housing market means a boost for the entire Dutch economy.

Although the housing market figures for this year are not yet known, banks and real estate agents are reporting an increase in sales following the reduction in transfer tax, which is good news. So has the Dutch housing market yet reached bottom and so can only move up? We have no way of knowing for sure, but if you are renting at the moment, this may be a great time to buy. The housing market seems to be recovering, interest rates are still attractively low and many sellers are highly motivated to sell at the moment.

If, as a seller, you need to move house (perhaps because of job imperatives), and are concerned about the possible difficulties in selling, you could choose to rent out your current home whilst waiting for the property market to improve (though you would need permission from your mortgage bank to do this). Clearly the last thing you want to face right now is an empty property and so having to pay two mortgages.

But back to the transfer tax. Will it actually go back up to 6% next summer? Your guess is as good as mine…