More expensive home thanks to gift tax exemption

The gift tax exemption for owner-occupied homes is primarily used by some recipients to purchase a more expensive home. Some first-time buyers are buying a home they wouldn't have been able to afford without the gift. This is according to a report from research agency SEO.

State Secretary for Finance Hans Vijlbrief cites the report in his response to written questions from the Labour Party (PvdA) and GreenLeft (GroenLinks) regarding the gift tax exemption for owner-occupied homes. This exemption was expanded effective January 1, 2017, with the expectation that individuals under 40 would use it to pay off debts and not to purchase a (more expensive) home.

High mortgage debts
At the time the easing of mortgage interest rates was implemented, people under 40, in particular, had relatively high mortgage debt. In 2016, 33 percent of homeowners between the ages of 18 and 40 had an underwater mortgage. By 2018, this figure had dropped to only 8 percent. The reason for this was not so much the gift tax exemption, but rising house prices, the introduction of the tax repayment requirement, and stricter lending standards.

No adjustment of the scheme
According to the SEO report, the use of the gift tax exemption is too limited to have a measurable effect on house prices. However, young people are entering the housing market slightly earlier. Because the government is in its caretaker capacity, no decisions are being made at this time regarding a possible adjustment to the scheme.