Fri, Nov 10, 2017 - Page 8 News List

Property is foremost a place to live

By Chang Chin-oh 張金鶚

It should not be ignored that the government’s reticence to address the problem might be due to political pressure being applied behind the scenes by vested interests.

What the government does in response to such pressure is part of a political calculation by those in power, reflecting the cost-benefit analysis of the relative merits and drawbacks of their response.

The root cause behind rising property prices is essentially a distortion of the traditional mindset that land ownership is a measure of wealth: People view property as something to invest in and to make money from, to the extent that property has become commodified, instead of being a place to live.

How is the government going to demonstrate to Taiwanese that it is willing to work on addressing the problem of unreasonably high property prices, while simultaneously avoiding the repercussions of a dramatic slide in prices?

The optimum approach would be to gradually reduce the incentives to investment in property as a way to make money — what might be called a policy of decommodification of property — so that house ownership returns to its most basic function of owning a property in which to live.

This could be achieved by making a clear distinction between ownership as occupier and ownership as non-occupier, and increasing the costs of ownership for non-occupiers by such measures as increasing house tax or land value tax, and the transaction costs of buying property — for example, by reducing loan-to-value ratios and increasing interest rates.

These measures would reduce any incentive to stockpile and speculate on property and gradually break the traditional mindset that property ownership is a measure of wealth.

Over time, this would cause a reasonable slide in housing prices, which should not have too much of an effect on property prices for those with occupier status, nor would it hurt financial institutions.

To lessen the political impact, the government could first implement a policy of designating ownership of the fourth and subsequent properties — which only account for 2 percent of the nation’s stock — as being ownership for non-occupier status. The government could then gradually amend this, depending on the amount of political push-back received.

Over the course of a perceptible — albeit gradual — decline in property prices, young people looking to buy a home would anticipate housing prices coming down to more reasonable levels in the near-term and would therefore not feel the need to rush out and buy a house.

If the government were to work on improving housing market conditions, prospective young buyers could either choose to rent and buy later, or simply rent and not buy at all.

This would have two effects. First, it would ease demand for properties, which would cause overpriced properties to fall to more reasonable price levels and, second, it would relieve the sense of trepidation that young people feel about getting onto the property ladder.

The government should begin to address this problem immediately.

Chang Chin-oh is a professor in National Chengchi University’s land economics department.

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