The Impact of Real Estate Taxations on the Inter-municipal Migration Which Influences the Housing Construction Dynamics

Abstract

This study investigates the Tiebout-Tullock hypothesis of “voting with one’s feet”, using NUTS5-level data for the year of the first real estate appraisal in Slovenia, 2011. The general approach is developed and the case study for Slovenia is presented. This analysis differs from previous related studies by Tullock, Cebula and other authors because the income tax burden in Slovenia is equal in all spatial units. However, the housing property tax burdens, which have not been introduced yet, but will be in the near future, are supposed to be different in different municipalities. We have found that the existence of local property taxes has strongly influenced migration patterns over time, therefore it can also influence the dynamics of needed real estate construction. From the study, we can conclude that the flows to the areas of smaller percentage of total population are more sensitive to changing housing property burdens. This finding means that spatial planners, who are planning the future construction of housing, and investors in constructions in the municipalities need to adjust their forecasts regarding the supply and demand of housing units also to the future real estate taxation policies, whereas the local authorities have to be aware how their taxation policy might influence the growth or decline of their urban area. The numerical results are limited by parameters of the gravity model on the NUTS5-level in Slovenia.