The ongoing efforts by the central and local governments to increase assessed land values, thereby raising revenue from the capital gains tax on property transactions, are deepening worries over the outlook of the property market, real estate analysts said yesterday.
The Ministry of Finance is to call a meeting on income taxes on property transactions (財產交易所得稅) today, while the Taipei City Government is set to unveil tomorrow new current assessed land values (公告現值), which the government currently uses as the tax base for the land value increment tax (土地增值稅).
The moves came after the Taipei County Government raised the current assessed land values in different districts by an average of 15.33 percent last week. All local governments are due to announce their annual land reassessment results by Jan. 1 to better reflect market changes.
Lee Jain-ming (李健銘), a researcher at Sinyi Realty Co (信義房屋), the nation’s only listed real estate brokerage, said the land value reappraisal will drive more potential buyers to the -sidelines and presage drastic tightening measures to curb housing speculation.
Taipei is slated to raise the current assessed land values tomorrow to bridge the gap between the assessed prices and market worth, an official said by telephone. She refused to comment on the size of the change, saying a review panel will hold a discussion before unveiling the new figures.
All property owners are subjected to a progressive land value increment tax from 20 percent to 40 percent when they sell their real estate, in addition to the income taxes on property transactions. Last week, Taipei County raised the current assessed land values under its jurisdiction as housing prices continue to climb sharply because of the availability of a mass rapid transit system and its geographic closeness to the capital.
Land values in Sinjhuang (新莊), Sanchong (三重) and Lujhou (蘆洲) areas will soar by 52.24 percent, 23.44 percent and 21.8 percent respectively, after the adjustments take effect on Jan. 1, the land department said, adding that the new assessed values still lag behind the real market values by 15 percent.
The hikes, the biggest in 20 years, may aim to pave the way for more tightening measures next year to cool down the property sector, Lee said, referring to talks by Minister of Finance Lee Sush-der (李述德) to tax capital gains from short-term real estate transfers, especially for pre-sale housing projects.
Under current rules, the government cannot collect any tax from pre-sale housing transactions. The ministry’s income tax division will meet today for discussions on property gain levies.
Lee Jain-ming voiced concern that the discussion may lead to land value increment or housing taxes based on actual transaction prices rather than figures -designated by the government. The latter are much lower.
“Taxes based on real housing prices will deal a severe blow to the market, but they promise an effective remedy to the soaring housing prices,” the analyst said.
Ni Tzu-jen (倪子仁), spokesman for the Chinese-language Housing Monthly (住展雜誌), also voiced concern over tightening measures that would discourage both speculators and home buyers.
“It is better to limit tax hikes to luxury homes and short-term housing transactions,” Ni said by telephone. “Ordinary people will suffer too if the increase is across-the-board in nature.”