New property tax increases for single-family homes are looming: financial experts warn of increasing burdens from 2025.

New property tax increases for single-family homes are looming: financial experts warn of increasing burdens from 2025.

According to a report from www.nw.de, the planned property tax reform in Germany remains controversial. The new calculation model could lead to significant tax increases for private homeowners. According to the Finance Office in Bielefeld, single-family home owners could expect an average property tax increase of 25 percent, while two-family home owners could expect an increase of 17 percent. On the other hand, commercial properties and mixed-use properties could be relieved by 55 and 32 percent respectively.

Property tax is made up of three factors. The first factor is the property tax value, which is intended to replace the old standard value. All property owners should file a property tax return by January 31, 2023 to determine property tax value. The second factor is the property tax figure, which in future in North Rhine-Westphalia should be 0.31 per mille for residential properties and 0.34 per mille for non-residential properties.

The third factor is the assessment rate, which is set by the cities and municipalities. The assessment rate for property tax B in Bielefeld is currently 660 percent, in Paderborn it is 479 percent and in Verl it is 170 percent. The new assessment rates are not yet known and will be calculated by the tax authorities. However, the preliminary result in Bielefeld suggests that the assessment rate would have to be increased from 660 to 762 percent.

A request to several cities in OWL and to the Ministry of Finance of the State of North Rhine-Westphalia revealed that concrete information about the expected property tax burden and possible corrections is currently not available. The effects of the property tax reform can therefore only be determined once the municipalities have set the new assessment rates.

However, municipal finance experts confirmed the tendency that residential properties could be subject to greater strain in the future than before, especially single- and two-family homes. Properties in chic or central residential areas have increased significantly in value in recent years, while commercial businesses have increasingly moved to the outskirts of the city, where property prices are lower. This could result in a shift of the burden to homeowners.

The property tax reform in Saxony differs from the model in North Rhine-Westphalia in order to avoid such a shift. There, a higher figure is estimated for residential properties than for commercial properties.

It remains to be seen how the property tax reform will actually affect the market and the financial sector. There is a possibility that private homeowners will be additionally burdened by the increased property tax and this could have a negative impact on property prices. Commercial properties and mixed-use properties, on the other hand, could benefit from relief. This could lead to changes in the real estate market, especially in metropolitan areas where land prices are already high.