Most construction companies yesterday gave a thumbs-down to a Cabinet proposal to prop up the real estate market by promoting rentals before sales.
“The policy is well-intended, but not feasible at all,” Edward Huang (黃炯輝), chairman of Ba Ba Business (巴巴事業) in Kaohsiung, said by telephone yesterday.
Huang said most of his peers in the business were not impressed with the measure either.
Huang’s remark came in the wake of a Cabinet proposal on Monday that will allow real estate developers to first rent out apartments to newlyweds and first-time homebuyers before later selling the units to them at affordable prices.
As the down payment for some properties in Kaohsiung runs as low as NT$200,000 (US$6,000), a majority of potential home buyers can afford to fork out such an amount, Huang said.
If a home buyer can meet this down payment threshold, there’s no reason he or she would prefer to pay a high monthly rental rather than the monthly installments, including interest, for a house, he said.
Huang urged the government to stop interfering in the market and allow the market mechanisms to prevail.
Chung Yin-tang (鍾尹堂), chairman of the market information committee at the Taichung Real Estate Development Association, said that no construction developer is interested in becoming a “big landlord.”
Chung, who is also president of Taichung-based Hsin Yeh Development Co (新業建設), said by telephone yesterday that residential developers were unlikely to rent out their newly built homes, which will then become second-hand properties that fetch poor prices when they go on sale.
“The price discrepancy between newly built houses and second-hand homes ranges between 20 percent and 30 percent,” he said.
Few individual owners will be willing to put their new homes up for rental, he said.
He described the government policy as “disoriented,” with the administration ignoring the importance and effectiveness of tax cuts to boost the property market.
Taxes such as the land value incremental tax, land value tax, property tax and the tax on acquisition of a real estate should be lowered to ease the burden on both property owners and buyers to effectively boost the market, he said.
Chang Chin-oh (張金鶚), professor of land economics at National Chengchi University, echoed the developers’ views.
Chang said that the supply of new homes for rental would be scarce and could lead to property disputes if the tenants later refused to buy or damaged the houses.
Chang suggested that the government offer rental subsidies to tenants to ease their burden instead of rewarding developers.
Chuang Nan-tien (莊南田), chairman of Prince Housing and Development Corp (太子建設), was not as negative.
He said that the policy could fit some real estate projects, such as a public housing complexes.
To make the policy work, Chuang said the government should ask banks first to provide financial support with an interest rate lower than the rental return to help developers survive.
He said the policy could be considered an act of charity in helping to address the needs of many poor people.