The Ministry of the Interior on Thursday released a report that showed real-estate companies and financial firms were expecting a cooling off in the market in the second quarter ahead of a plan to implement a luxury tax on July 1. About 45 percent of the polled companies also said they believed property prices would fall by between 3 percent and 10 percent in the second quarter, while 27 percent expected prices to drop by more than 10 percent.
The ministry’s latest report — jointly issued by the ministry’s Architecture and Building Research Institute and the Taiwan Real Estate Research Center of National Chengchi University — was one of several market reports released last week that foresee a potential slowdown in the real-estate market, indicating the planned tax was beginning to affect prices and transactions.
A study conducted by Chinese-language Housing Monthly showed the number of property transactions dropped by between 30 and 50 percent after the government introduced the luxury tax plan on Feb. 24. Two other studies conducted by local real-estate brokers Taiwan Realty Co and Yungching Rehouse Group also showed that prices of existing houses in the nation’s six major metropolitan areas had already dropped over the past month.
However, the difference between these reports is that the one released by the ministry was the government’s final report on the real-estate market. The research was discontinued because government officials thought it did not meet government expectations, after it was jointly conducted by the ministry’s Architecture and Building Research Institute and the university’s Taiwan Real Estate Research Center over the past 12 consecutive years. Officials also said canceling the project would save resources owing to a rise in the availability of similar research by private institutions including real-estate brokers and construction companies.
The ministry’s decision has invited questions as to why it was giving up a chance to observe the changes in the market for itself. It presents an obvious inconsistency in its policy of closely monitoring the real-estate market and detecting any problems earlier.
Moreover, it shirks the government’s responsibility to provide people with access to real-estate information. Evidence shows that most home buyers have fallen victim to a situation in which some have more information about real-estate transactions and prices than others — a problem known as information asymmetry. In the real-estate business, property brokers, construction companies, land developers and financial institutions have better access to such information.
One easy, but unsatisfactory justification for the ministry stopping the project, according to the Taiwan Real Estate Research Center, is that the study failed to reflect regional development. However, the solution to improving the research in terms of accuracy and comprehensiveness is to earmark more money, rather than to stop funding it. The bottom line is that government studies can play a complementary role to research conducted by private institutions.
Regardless of the government’s excuses, objective and reliable market data are essential to safeguard the interests of homebuyers and it will also allow the government to continue monitoring the market. Spending money on market research serves not just the public, it is also good for the government itself.
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