This year, prices of luxury houses in Taiwan have surged rapidly, with the market swamped by excess funds thanks to a government policy to lower the inheritance and gift tax, the relaxation in cross-strait trade and low lending rates by banks.
But the swelling prices of luxury residences have in turn fueled an overall hike in housing prices in some cities, making housing affordability the top concern in a government poll of the “top 10 complaints” among the public.
As public concern increases over the seemingly overheating property market — especially in Taipei — the government has come up with proposals to stop the problem from threatening social stability.
One of these was the proposal by Taipei tax authorities to levy a higher property tax on owners of luxury residences from 2011. The proposal would not be finalized until March at the earliest. Tax officials estimated it would rake in approximately NT$1 billion (US$31 million) in additional tax revenue for the city each year.
Yet this proposal is not likely to discourage house owners or property investors from bidding up already high luxury units. That’s because firstly, the cost of a higher housing tax would still be much lower than the return on such investments. Moreover, excess funds would continue to chase luxury housing as long as the market’s low lending rates stay put.
In addition, increasing capital inflows from overseas Taiwanese and Chinese investors will likely push prices of luxury units higher following the normalization of cross-strait trade — until one day the bubble bursts.
Another government proposal was the Council for Economic Planning and Development’s plan to develop 13 commuter routes — which it called “transport corridors” — nationwide to cut the time it takes people to get from suburban residences to their urban offices to within an hour.
There is no doubt that Taiwan’s urban sprawl has expanded, driven by population growth, lower housing prices in suburban areas and zoning deregulation. The government is now outlining plans to improve public transportation, including railways, mass rapid transit systems and public buses, to provide faster and more convenient services to people living in suburban areas.
But the council’s commuter route proposal indicates that the government is prioritizing measures to develop suburban areas, rather than trying to fight the soaring property prices in urban areas.
As housing prices have risen at a disproportional pace, the public expects the government to take a firm stance to rein in the property market and deter speculation, but the commuter proposal would likely lead to more working and middle-class families migrating to suburban areas while freeing up urban spaces for land developers, property investors and the rich alone.
Under a free market system, it is normal to see property prices rise and fall. But it is understandable if the public is frustrated with the recent rise in housing prices as it does not comply with the real growth in the economy, forcing them to move to suburban areas.
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