The Cabinet’s decision to tighten regulations on transactions of farmland and farmhouses might push down their prices, which have soared in recent years partly because of exemptions from various taxes aimed at curbing property speculation, analysts said yesterday.
The Executive Yuan on Thursday promulgated plans to limit the sale of farmland and farmhouses to farmers for agricultural use starting next month at the earliest in the absence of protest.
The announcement came two months after Council of Agriculture Minister Chen Bao-ji (陳保基) voiced the need for regulatory restrictions to stem the feverish demand for farmland and farmhouses, which have been spared from the special sales tax as well as the upcoming income taxes on property gains.
“Farmland prices might drop by half or more, as they can no longer serve as a safe haven for property funds,” Evertrust Rehouse Co (永慶房屋) researcher Andy Huang (黃舒衛) said by telephone.
Under the new rules, only people with agricultural insurance or substantial plans to engage in farming can build or acquire farmhouses. The promulgation is to last through July 27 when related parties can propose revisions if necessary.
The government earlier put the restrictions on hold due to protests from lawmakers, but it has decided to press ahead with the change to halt the rapid disappearance of farmland.
About 7,600 luxury homes have been built under the guise of farmhouses in Yilan County over the past 15 years, reducing the county’s farming area by 1,900 hectares, civic groups said.
In 2000, the government lifted a ban limiting farmland to agricultural use, allowing property funds to flow to farmhouses, which have gained popularity among retirees and people who want to escape city life.
On average, two farmhouses were sold each day over the past five years, with 60 percent being resold within three years of purchase and only 30 percent sold to farmers.
In the future, farmhouses will be required to meet new sewage and other requirements to make sure they are intended for farm use, Huang said.
The number of farmhouses for sale could rise going forward after surging 70 percent year-on-year in the first four months of this year, compared with a 7 percent increase for residential houses and a 3 percent gain for office space, Huang said.
The number of farmhouse transactions slumped by 37.2 percent to 5,068 in the January-to-March period compared with the same period last year, while transaction value fell 52.2 percent to NT$28.64 billion (US$914.67 million), Huang said, citing official statistics.
Tseng Chin-der (曾進德), a property researcher at Sinyi Realty Inc (信義房屋), the nation’s only listed broker, said liquidity risks pose the biggest threat to farmhouse sellers, who might have difficulty finding buyers other than those with a genuine interest in farming. In the past, many buyers turned farmhouses into bed-and-breakfasts.
“Prospective buyers should wait and see how the restrictions pan out to avoid being trapped,” Tseng said on the telephone.
A drastic price correction appears inevitable, he added.
Ho Shih-chang (何世昌), a research manager at Chinese-language Housing Monthly magazine, was less pessimistic, saying that the government often turns a blind eye to speculators.
It is up to local governments to enforce the restrictions, and it is not difficult to find “fake” farmers if necessary, Ho said.
The government has repeatedly vowed to crack down on fake farmhouses, but has met with very limited success due to a lack of resolve, he said.
“That accounts for the prevalence of cheaper, but illegal, buildings across Taiwan,” Ho said.
Easy access and affordability will support the value of farmhouses, Ho added.
In terms of deals, Taichung has the most farmhouses for sale at 2,863, followed by Hualien at 2,472 and Kaohsiung at 2,279, a report by Evertrust said, adding that Taoyuan has 2,038 for sale and Yilan 1,881.
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