Fri, Oct 03, 2014 - Page 13 News List

Property prices to plunge by as much as 30 percent

FLEXIBILITY:Analysts say that despite attempts by sellers to sit out the government cuts in housing prices, recovery can only be achieved through price corrections

By Crystal Hsu  /  Staff reporter

Property prices may contract 10 percent in central districts and tumble by 30 percent in outlying areas, as the government moves to tax property transaction gains based on real trading prices, DTZ general manager Billy Yen (顏炳立) said yesterday.

Yen said a continued standoff between sellers and buyers may put brokers out of work and it would make more sense for sellers to concede, given the government’s unfavorable policy stance.

“Builders and developers had better quit being inflexible over the pricing strategy as a recovery is unlikely without a price correction... Price corrections are just a matter of time,” Yen told a news conference in Taipei.

Despite sluggish trading, sellers in commercial and residential markets generally plan to sit out government efforts to curb housing prices, as patience paid off in the government’s previous credit-tightening measures.

The situation is somewhat different this time, as the Ministry of Finance plans to draw up a tax reform measure by the end of this year that would raise tax burdens on property transaction gains based on real trading prices, Yen said.

The government is in a better position to do so now after requiring buyers and brokers to register transaction data for two years.

Currently, property owners pay separate house and land taxes based on modest government-assessed values.

Capital gains from property transactions are likely to be subjected to maximum income taxes of 45 percent for houses valued at NT$30 million (US$984,900) or more as some have suggested.

The reform plan would dry up the market, as most houses in greater Taipei cost more and the government would therefore take the bulk of property gains, Yen said.

Home prices in Taipei’s central locations would drop 5 percent to 10 percent a year and plunge by 30 percent elsewhere in the city, Yen said, adding that houses outside Taipei would fare far worse.

Owner occupancy drove more than 50 percent of commercial property transactions last quarter, as players stayed on the sidelines, DTZ said in a report.

Commercial property transactions totaled NT$40.09 billion last quarter, better than the second quarter, as Cathay Life Insurance Co (國泰人壽) sold partial floors of the 12-story Dunnan Financial Building — which houses Eslite Bookstore (誠品) — on Taipei’s Dunhua S Road to Grand Industrial Limited of Baofeng (寶豐隆興業).

State-run Mega Financial Holding Co (兆豐金控) plans to sell underlying properties of its real-estate investment trust (REIT) fund, CTBC Financial Holding Co (中信金控) wants to sell its former headquarters building in Xinyi District (信義) and Hung Sheng Construction Co (宏盛建設) is slated to sell a new grade-A office building on Nanjing E Road.

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