The nation’s luxury housing market is drying up as holding tax hikes, selective credit controls and a proposed property gains levy scare away potential buyers, government data show.
The official real-price registration Web site has seen just 17 deals valued at NT$60 million (US$1.92 million) or more so far this year, plunging 91 percent from 187 during the same period last year and 205 in 2013.
“The figures show that luxury homes are bearing the brunt of unfavorable policy moves intended to cool the property market,” said Andy Huang (黃舒衛), a researcher at Evertrust Rehouse Co (永慶房屋), Taiwan’s largest broker by number of outlets.
Luxury homes, defined by the central bank as those sold for NT$70 million in Taipei, NT$60 million in New Taipei City and NT$40 million elsewhere, can only apply for 50 percent mortgage loans.
It took an average of 10 months to find a buyer for luxury homes last quarter — twice as long from a year earlier — and the situation is deteriorating as the proposed tax on property gains pans out, Huang said.
The Ministry of Finance is fine-tuning a draft that seeks to introduce a flat 17 percent income tax on houses sold for NT$40 million or more. The tax rate will climb to 30 percent for houses sold within two years of purchase and 35 percent for houses sold within one year of purchase, according to the draft that becomes law next year if the legislature gives the green light.
Luxury home owners’ pricing inflexibility contributes to slow sales, Huang said.
Most luxury home owners would rather stay put than lower prices, Huang said, adding that low interest rates make it easier to do so.
The central bank argued in a recent report that tax policies are more effective than credit controls or interest rates in moderating the housing market, given that only 28.5 percent of home owners have mortgage loans.
Credit controls are particularly ineffective in curbing investors with high net worth, who channel funds to luxury homes in prime locations to take advantage of an inheritance tax cut promulgated in 2009, the report said.
Taiwan is one of the few countries in the world with separate land and house taxes that are based on much lower assessed property prices instead of their real value, the central bank said.
The property tax plan can help address the longstanding flaw, the central bank said, calling for the plan’s quick passage to minimize the impact of policy uncertainty on the market.
The government can also join forces with the private sector in increasing the number of state-run houses for rent, in a continued bid to make home prices more reasonable, the report said.
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