Housing transactions shrank 20 percent to 30 percent in different parts of the nation last month from a month earlier, as cautious sentiment deepened ahead of the implementation of the luxury tax on June 1, analysts said.
Taipei bore the brunt of the forthcoming levy, with home sales plunging 28.5 percent to 3,957 units last month, from 5,537 in March, city government statistics released showed last week.
New Taipei City (新北市), where housing prices have registered sharp increases in the past two years, saw home transfers weaken 25 percent to 7,451 units last month, from 9,924 a month earlier, government data found.
Stanley Su (蘇啟榮), head researcher at Sinyi Realty Co (信義房屋), the nation’s only listed brokerage, attributed the declines to the upcoming luxury tax on property trading, which will subject houses resold within two years of purchase to a 10 percent levy. The rate will climb to 15 percent of transaction prices if the -property is sold within one year of purchase.
“The tax plan is expected to trigger a price correction, prompting prospective buyers to watch on the sidelines the impact unfolding,” Su said.
The sellers are not willing to concede, bolstered by the market’s sound fundamentals, he said.
Speculation apart, excessive liquidity and low interest rates amid stable economic growth are believed to be the biggest contributor to soaring housing prices in Taiwan. The 10 percent to 15 percent levy would blot out potential returns, driving investors out of the market, while peers with deep pockets are poised to hold onto properties until the two-year limit expires, Su said.
Su expects the standoff to last until the market knows better how to respond to the tax upon its implementation next month.
Currently, real-estate agencies are not required to file property transactions based on their real prices. Huge gaps exist between actual property prices and government assessed values for tax purposes, rendering existing levies toothless in curbing speculation.
Home sales fell 27 percent to 3,164 units in Greater Kaohsiung last month from 4,334 in March, while sliding 23 percent monthly to 992 cases in Greater Tainan, from 1,280, respective official data indicated.
Greater Taichung appeared the least affected, with housing transactions dropping 17 percent to 3,261 units last month, compared with 3,940 in March, government statistics said.
Jeffry Huang (黃增幅), chief researcher at Evertrust Rehouse Co (永慶房屋), said the decrease matched market expectations and that the effect on property prices may be more evident later. He expects housing prices to drop 5 percent to 10 percent in Taipei and 10 percent to 20 percent in New Taipei City.
The luxury tax also caused a chill among presale housing projects, although they are not subject to the levy before construction is completed.
New housing projects to be launched between next week and June 15, during the so-called May 20 promotion period, total NT$125 billion (US$4.34 billion), falling 21 percent from NT$158.6 billion last year, according to the Chinese-language Housing Monthly (住展雜誌).
The greater Taipei area is home to 75 percent of the projects, suggesting it remains the nation’s most popular place among prospective buyers, despite higher housing costs there, the magazine said.