Commercial property transactions totaled NT$35.2 billion (US$1.12 billion) this quarter, down 3 percent from the same period last year, driven mainly by land deals, as no office buildings changed hands, CBRE Taiwan said yesterday.
The local branch of the US property consultancy attributed the sluggish market to unfavorable government policies related to property taxes and a yield requirement.
“Policy uncertainty is the worst negative influence on the market,” CBRE Taiwan managing director Joseph Lin (林俊銘) told a news conference, referring to the proposed income tax on gains from property transactions.
The Ministry of Finance reportedly plans to raise the tax rate from a flat 17 percent to 20 percent and lift the rate to 35 percent on property sold within one year of purchase and 30 percent within two years of purchase.
In addition, the ministry plans to introduce a flat tax of 12 percent for property sold after more than 10 years of ownership, after academics panned a previous proposal as too lenient and ineffective at advancing social fairness and justice.
The property tax plans have fed price correction predictions, and home transactions fell to a 12-year low last year.
Commercial property deals fared equally poorly, given the absence of a major office space transfer this quarter, Lin said, adding that CBRE Taiwan limits its quarterly survey to deals valued at NT$300 million or more.
The trading volume of NT$35.2 billion represents a 51 percent decline when compared with the preceding quarter, the report showed.
Numerous local governments have helped raise holding costs for buildings in popular locations through annual adjustments of their assessed values, saying that these properties are the biggest beneficiaries of improved infrastructure and should pay more taxes.
The increases in holding costs make owning luxury houses and office buildings more expensive, if not unbearable, Lin said.
Life insurance companies remained on the sidelines — as buyers and sellers — after the Financial Supervisory Commission kept the minimum yield requirement unchanged at 2.875 percent.
Most commercial properties in Taipei would have difficulty reaching the requirement without price corrections, Lin said.
CBRE Taiwan forecast a correction of 10 to 15 percent for commercial properties in non-core districts this year to end the tug-of-war.
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