Chang said properties were considered the best tax-saving vehicle for investors because of the relatively lower property taxes that would be levied, discouraging investors from moving assets abroad.
“The Taiwan government taxes properties based on building value, land value and appreciation. However, these numbers are usually based on the government’s appraisal, which is consistently lower than the market value,” he said.
Secondly, a lower interest rate environment foretells a lower investment risk to both buyers and developers, which could leave market participants unscathed at this difficult time.
“Lower interest rates are unlikely to persuade people to buy properties while prices are dropping, but it reduces default risks for stretched house buyers and property developers and could accelerate demand recovery once prices stop declining,” Chang said.
To boost economic growth and encourage private consumption, the central bank has cut its benchmark discount rate by 212.5 basis points to 1.5 percent since September. Standard Chartered forecasts that the central bank will cut the discount rate to 1 percent in the first half of this year, while Citigroup predicts the central bank will move faster and lower the rate to 1 percent by March.
Still, analysts are cautious about the local housing market in the short term, hinting that the problems of oversupply and weak buying interest are still hitting the sector.
Chang said investors were unlikely to buy properties in the near-term purely because of tax-savings. Investors would wait for the right time to enter the market “as further price declines are expected,” he said.
Eric Lai (賴建承), an analyst at Marbo Securities Consultant Co (萬寶證券投顧), agreed with Chang.
“A considerable number of people will probably adjust their wealth management strategy following the tax cut but there is no hurry to do so,” Lai said.
But for Cheng Cheng-mount (鄭貞茂), chief economist at Citigroup Inc Taiwan, the tax cuts on inheritance and gift levies will not alter the status quo much.
“With or without the [inheritance] tax cut, people who can afford it have probably already acquired real estate in line with their asset allocation plans,” he said. “I doubt the tax reform will prompt them to buy more.”
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