President Ma Ying-jeou’s (馬英九) government on Wednesday announced plans to address public concern about real-estate speculation and surging housing prices, in a move that was clearly focused on the presidential and legislative elections in January, given that it came just days after Democratic Progressive Party Chairperson Tsai Ing-wen (蔡英文) unveiled her own policy proposals on how to deal with the matter.
Public discontent over high housing prices and widening income disparities has become a focal point in the campaign platforms of the two presidential candidates.
Although the government introduced a luxury tax in June to deter speculative transactions in the real-estate market, the levy has so far proved ineffective at reining in housing prices.
Although the issue of housing affordability is especially serious in Taipei, it has still attracted public attention nationwide because rising housing prices seem at odds with most people’s experience of stagnant income growth, and are therefore increasingly detached from economic reality. A survey conducted by the Construction and Planning Agency showed that the average housing price-to-income ratio was 13.2 in Taipei in the first quarter of this year and 8.2 for the whole of Taiwan. That means it would take 13.2 years of an ordinary family’s income to buy a house in the city, assuming the family did not eat or drink or spend money on anything but the house, and 8.2 years on average for all households in Taiwan. Economists say that a reasonable ratio should not exceed 5.1.
The Ma administration has said it would push for new legislation and revise existing laws on land expropriation, real-estate transactions and social housing projects before December to curb property speculation. For example, the Executive Yuan plans to introduce an amendment to the Land Expropriation Act (土地徵收條例) to the legislature that would compel the government and land developers to pay the “market price” when expropriating private land. It would also require the re-evaluation of the market price every six months. The government also plans to revise the Real Estate Broking Management Act (不動產經紀業管理條例), the Statute for Equalization of Land Rights (平均地權條例) and the Land Administration Agent Act (地政士法) so that a database of real-estate transactions and prices can be established, allowing the government to impose a higher tax based on a fairer price for expropriated land.
The government is moving in the right direction with its efforts to seek fairness in the real-estate market by using “market price” rather than “current assessed land value” (土地公告現值) or “current assessed housing value” (房屋評定現值) as a tax base for land and house transactions, because the assessed value is often much lower than the market value.
In addition, because both the land tax and housing tax are still relatively low compared with those in other countries, the low tax burden encourages speculative investment in the real-estate market, further widening income disparities.
However, the government’s plans are not expected to bring down housing prices, nor are they as aggressive as Tsai’s proposal to make the tax system fairer and promote a more equitable society. Tsai’s plan is to introduce a property transaction income tax, or a capital gains tax on the sale of land and houses based on market value. Although her policy proposal is not intended to bring down housing prices, it would help achieve transparent property transactions and fairer rates of taxation.