Property tax B increases: effects on property owners and expected development in 2024

Property tax B increases: effects on property owners and expected development in 2024

According to a report from www.fr.de,

Property tax B is constantly increasing and burdens property owners. The effects are already being felt and could worsen further in 2024. Last year, over a hundred communities with more than 20,000 residents raised their property tax rates, some significantly. As a result of the increase, the average weighted assessment rate of property tax B rose by 5 percentage points to 554 percent, as shown in the 2023 assessment rate survey by the German Chamber of Commerce and Industry (DIHK). In the previous year, the national average assessment rate was 549 percent.

Property tax B has been steadily becoming more expensive for several years. The DIHK mainly cites three reasons for the increase in recent years. Firstly, compared to previous years, local financial supervision in many countries is “significantly more active in the run-up to the approval of local budgets”. Secondly, changes in the municipal financial equalization systems, in particular the increase in the leveling assessment rate, lead to subsequent increases in the municipalities that were previously below this assessment rate. Thirdly, it is now a question of securing the income from the new assessment base for property tax from 2025.

Last year, a total of 103 municipalities increased the assessment rates for property tax B. The effects of the constant property tax increases on property owners are already noticeable. The assessment rates rose significantly, particularly in Hesse and North Rhine-Westphalia. According to experts, it is problematic that private properties are burdened significantly more than commercial properties by the higher assessment rates. In some cases, the assessment rates rose by over 100 percentage points.

It is worrying that the calculations in the municipalities already point to further massive shifts to the detriment of private owners. The differences between urban and rural areas are also clearly noticeable. A further burden on citizens in the form of property tax increases no longer seems feasible given the existing burdens.

The rising property taxes could have a long-term impact on the real estate market as owners could be forced to sell their properties due to the high tax burden, which could lead to increased supply and therefore possible price pressure. In the worst case, this could lead to a real estate bubble and an exodus of private individuals from the affected areas. Developments like these could put significant pressure on the real estate market in these regions and lead to undesirable economic consequences in the long term.