Tax Policies and Housing Prices: An Empirical Analysis

Abstract: This thesis evaluates the effect on housing prices from the abolished wealth tax in 2007 and the property tax reform from 2008. This is done using a municipality-level panel dataset, covering all municipalities within Sweden from 2005-2010. In order to estimate if the reforms have increased the prices, a Difference-in-Difference approach is used, using both house prices and apartment prices as an outcome variable. From the theoretical framework, one can expect both reforms to positively affect house and apartment prices. Using house prices as the outcome variable, I find a positive effect in the graphical analysis, and in the regression models. This thesis finds no effects on prices using apartment prices as the outcome variable. Furthermore, I test if the high-income municipalities have benefited more from the reforms. I do not find evidence that high-income municipalities have benefited more from the reforms. This thesis provides a better understanding of how the tax reforms introduced in 2007 and 2008 affected the housing market.