Presale and new home transactions declined sharply in Greater Taipei last quarter, but prices climbed to new heights on the back of demand for an inflation hedge after speculators fled the market, a report released yesterday showed.
Land development and construction companies launched 11,586 units of presale and new homes worth about NT$199.6 billion (US$6.92 billion) during the second quarter in Greater Taipei, the quarterly survey by Cathay Real Estate Development Co (國泰建設) and National Chengchi University’s Taiwan Real Estate Research Center (台灣房地產中心) found.
The value shrank 36.3 percent from the preceding quarter and 22.9 percent from the year-earlier level as companies turned conservative ahead of the implementation of the new luxury tax last month.
In Taipei City, presale and new housing totaled 520 units, priced at NT$24.4 billion last quarter, a plunge of 69.7 percent from three months earlier and 74.9 percent from a year earlier, the report said.
The first-hand housing market reached 3,005 units valued at NT$75.4 billion, falling 32.6 percent from the first quarter and 67.8 percent from the previous year, the report indicated.
“The figures show Taipei City bearing the brunt of the luxury tax as transactions contracted more than 80 percent last quarter,” said Chang Chin-oh (張金鶚), a land economics professor at National Chengchi University and head of the research panel.
The housing market is more sensitive to unfavorable policies because speculation accounts for a sizable amount of trading, thanks to the low entry threshold.
However, the shrinking volume failed to exact price concessions from land developers or construction firms, as new housing costs gained 4.2 percent to NT$671,700 per ping (3.3m2) in the capital and 6.67 percent to NT$330,600 per ping in New Taipei City (新北市), the report said.
“The increasing number of luxury homes pushed up average prices,” Chang said.
“Expectations that Chinese capital will flow to local properties following the arrival of free independent Chinese travelers also lent support,” he said.
New housing priced at NT$1 million per ping or more took up 48 percent of presale units in Taipei City, the report said, as developers placed more emphasis on the segment.
Across the country, new housing averaged NT$239,500 per ping last quarter, an increase of 6.43 percent from the previous quarter, while transactions dropped 63.9 percent and price concession room widened to 15.62 percent, the report said.
The falling number of transactions and rising prices suggest the market has yet to find its equilibrium and requires a longer correction period, said Hua Ching-chun (花敬群), a finance and banking professor at Hsuan Chuang University and a member of the research panel.
“It is premature to pronounce the luxury tax a failure against such a backdrop,” Hua said. “The hype about Chinese capital will see its impact diminishing as in the past decade.”
A total of 45 housing units nationwide have been bought by Chinese capital so far.
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