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MORTGAGE DEBT
Tabelle 2
Main tax categories affecting housing/mortgages
in EU, 2003
Mortgage debt in percent of GDP differs widely
across the EU-15 countries (Table 1). The Netherlands, Denmark and the UK exhibit percentages
between 70 and nearly 100, while Italy, Greece and
France are in the range between 13 and 25 percent.
The share in the European mortgage market is highest for Germany and the UK with the Netherlands
ranking third. The real mortgage growth rate (col. 3
of Table 1), too, differs considerably between countries, but is in almost all cases significantly higher
than the GDP growth rate. Mortgage growth seems
to be high in countries with a low amount of mortgage debt per GDP (like Italy and Greece), while it
is low in countries with an already high percentage
of mortgage debt (like UK and Germany).
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
United Kingdom
The figures of Table 1 may be partly explained by the
different tax treatment for housing and mortgages
(Table 2). But, as Wolkswijk in a recent analysis (2005)
shows, more important determinants of mortgage
credit are the stock market growth, increases of the
price for houses and financial deregulation.
Tax on
imputed
rent
Interest
deductibility
Capital
gains tax
N
Y
N
N
N
N
N
N
Y
Y
Y
N
N
N
N
Y
Y
Y
Y
N
N
Y
Y
Y
Y
Y
Y
Y
Y
N
n
n
n
n
n
n
N
n
n
n
N
n
n
n
n
Note for the last column: Capital letters denote absence of a capital gains tax, small letters refer to a
capital gains tax being in place, but the gains on selling a house being de facto exempted, for instance because it is sold a certain number of year after its acquisition.
Source: International Bureau of Fiscal Documentation (2003), compiled by Wolswijk (2005).
Developments on the mortgage market are relevant
for macroeconomic policy decisions because interest
rate setting for mortgages may impact on the monetary policy transmission channel. Moreover, “mortgage debt” seems not to be limited to housing purpos-
es proper, but, in practice, applies also to non-housing
consumption purposes. Finally, different housing and
mortgage tax treatments across countries and, thus,
different degrees of housing subsidies may increase
the differences between national inflation rates (van
den Noord 2003, Osterkamp 2005).
Tabelle 1
This leads to the question whether the use of fiscal instruments to correct imbalances and price volatility
on the housing market and to address distorsions of
the monetary policy transmission channel is in order.
The following instruments – specifically with view to
price volatility – are analysed by Wolswijk: increased
stamp duties (transaction tax on buying a house), regular updating of market values of dwellings, inclusion
of anti-cyclical (or anti-speculative) elements in the
capital gains tax, targeted reductions in mortgage interest tax relief (e.g. for low interest rates). Moreover,
municipalities could increase the elasticity of housing
supply by adapting the release of building permits to
the situation on the housing market.
EU mortgage and housing market characteristics, 2003
Real
Mortgage Share in EU
mortgage
mortgage
debt
growth rate
market
(in % of
GDP)
in %
in %
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
United
Kingdom
26.4
28.5
87.5
35.6
24.7
54.3
17.4
45.0
13.3
33.4
99.9
50.6
42.1
50.0
1.4
1.8
3.9
1.2
9.1
27.2
0.6
1.4
4.1
0.2
10.7
1.6
7.4
3.2
9.0
3.5
4.8
7.6
7.7
0.9
21.6
21.7
18.5
15.6
14.3
–1.1
16.4
5.7
70.4
26.4
3.4
Such instruments are considered by Wolswijk to be of
a structural nature. But he also asks whether “finetuning” may be warranted and possible. The author
mentions changes of or exemptions from the turnover
tax for building and repairing houses, cycle-depen-
Source: Wolswijk (2005) and sources mentioned there.
CESifo DICE Report 4/2005
84
Database
dent changes of stamp duties, property tax rates and
subsidies. He mentions an earlier idea of Maclennan
et al. who propose for the UK to make the Bank of
England responsible for setting the property tax rate.
Wolswijk is, however, cautious what concerns the use
of fine-tuning instruments due to doubts about their
appropriate timing and calibration.
R. O.
References
Maclennan, D., J. Muellbauer and M. Stephens (2003), “Asymmetries in Housing and Financial Market Institutions and EMU”,
CEPR Discussion Paper 2062.
Noord, P. van den (2003), “Tax Incentives and House Price Volatility
in the Euro Area: Theory and Evidence”, OECD Economics Department Working Paper 356.
Osterkamp, R. (2005), “Tax Preferences for Housing”, DICE Report
3(1), 83 – 84.
Osterkamp, R. (2004), “Mortgage Banks”, DICE Report 2(4), 67– 71.
Wolswijk, G. (2005), “On some Fiscal Effects on Mortgage Debt
Growth in the EU”, European Central Bank Working Paper 526.
85
CESifo DICE Report 4/2005