The new property tax, which has been in force since January, has been criticised by the property owners' association Haus & Grund. For property owners, this has resulted in ‘a patchwork of annual amounts that in some cases vary enormously,’ explained association president Kai Warnecke on Thursday in Berlin. An analysis of the hundred largest cities commissioned by the property owners' association concludes that in many places the reform has been ‘used to implement substantial tax increases’ – although in some cases the rates have also been reduced.
According to an analysis by IW Consult, a subsidiary of the German Economic Institute (IW), Zwickau in Saxony tops the list of the most affordable major cities, with an annual cost of €258 for a model home. At the bottom of the list are Tübingen, Mannheim, Heidelberg, Stuttgart and Karlsruhe, all of which are located in Baden-Württemberg. In Tübingen, the annual cost is €1,377.
According to the property tax ranking, there are also significant differences between the states. For example, owners of a single-family home in the cities surveyed in Saxony-Anhalt paid an average of €305 per year, compared to €850 in Berlin, explained Haus & Grund.
The background to this is that, since the beginning of the year, new rules for determining property tax have been in force for around 36 million plots of land and properties, which, alongside trade tax, is one of the most important sources of income for local authorities. The Federal Constitutional Court overturned the previous regulation in 2018 because it had been calculated using outdated ‘standard values’. In many places, this meant that huge increases in property values were not taken into account.
As part of the property tax reform, the states of Hamburg, Lower Saxony, Hesse, Baden-Württemberg and Bavaria introduced their own regulations based on area or land value. The remaining eleven federal states use the so-called federal model, which uses notional rental income and land value to calculate tax.
Haus & Grund criticised the fact that the model chosen by the federal states and the assessment rate policy of the cities would determine the level of property tax after the reform ‘more than ever before’. ‘This does not result in a reliable, fair burden for owners,’ criticised Warnecke. The association advocated ‘immediately introducing’ the Bavarian or Lower Saxony property tax model ‘in all federal states’. The value-based model in Baden-Württemberg, on the other hand, had caused the federal state to ‘suffer an unprecedented decline in the ranking’. The federal model had also ‘enabled numerous tax increases’.
According to the ranking, the annual property tax is higher than in 2024 in half of the 16 federal states, including Baden-Württemberg, Berlin, Bremen, Hamburg, North Rhine-Westphalia, Schleswig-Holstein, Rhineland-Palatinate and Saarland. In the remaining eight states, however, the amounts fell. Based on all 100 cities surveyed, the annual property tax rose by an average of 46 euros.
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