The housing market, which has seen transactions plunging for nearly two months, is poised for a price correction now that a bill to tax short-term property transfers has cleared the legislature, analysts said yesterday.
The depth of correction is expected to match or exceed the tax rates — from 10 percent to 15 percent of trading prices, if properties are resold within one to two years of their purchase — they said.
“The enactment of the luxury tax bill removes a lingering uncertainty from the market,” Lee Jain-ming (李健銘), a researcher at Sinyi Realty Co (信義房屋), said by telephone.
“The selling side will be more willing to soften prices now that the levy will be implemented,” Lee said.
Housing prices remain virtually unchanged after the government unveiled the luxury tax plan in late February, although transactions have nearly halved in parts of the nation while the number of houses for sale have increased sharply.
The number of homes for sale in the prime Xinyi District tops other areas in Taipei, picking up 40 percent last month and this month, compared with January and February, Lee said.
Songshan (松山) and Shihlin (士林) districts rank second and third, as the number of homes for sale jumped 37 percent and 32 percent respectively during the same period, he said.
Meanwhile, available homes surged 40 percent in Linkou (林口), New Taipei City (新北市), followed by Banciao (板橋) at 35 percent and Sinjuang (新莊) at 30 percent, where speculation accounts for 50 percent of transactions in recent two years, Lee said.
Sinyi Realty, the nation’s only listed housing brokerage, expects home prices to shed 5 percent to 10 percent in Taipei and drop up to 20 percent in New Taipei City until the end of the lunar Ghost Month in late August.
Evertrust Rehouse Co (永慶房屋), another major broker, said the luxury tax legislation showed the government was serious about cooling the property market after previously limiting its efforts to moral persuasion.
“The legislation will help put an end to this tug of war over pricing and boost transactions ahead of the tax’s implementation,” Evertrust Rehouse head researcher Jeffry Huang (黃增福) said by telephone.
The selling pressure is more evident for presale housing projects, whose transactions entail less capital and are consequently rife with speculators, Huang said.
While pre-sale housing projects won’t be liable for the luxury tax before the construction is finished, buyers have faced potentially higher interest rates after the central bank started to tighten monetary policy in June last year, the researcher said.
The National Tax Administration has also stepped up a crackdown on tax evasion by presale housing traders to close a legal loophole.
Hua Ching-chun (花敬群), a banking and finance professor at Hsuan Chuang University, who closely tracks the property market, said buyers would remain cautious until after next year’s presidential election.
“The tax legislation marks the beginning of a correction that may last longer than a year,” Hua said. “Home prices should drop by half in New Taipei City in the absence of speculation.”
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