The nation’s housing market is showing signs of developing a potential asset bubble, but urban renewal could help raise housing supply in Taipei and drive down property prices, Minister of Finance Chang Sheng-ford (張盛和) said yesterday.
Following central bank Governor Perng Fai-nan’s (彭淮南) remarks in the legislature last week, Chang is the second head of a financial and economic government agency to express concern over the high property prices in Taipei in two weeks.
“Housing prices in Taipei are very high,” Chang said during a legislative question-and-answer session.
The ratio of home prices to incomes averaged 12.4 in Taipei in the second quarter, much higher than the international standard of 5, data from the Ministry of the Interior showed.
In addition, the return on investment for housing rentals in Taipei has been on a downward trend, indicating some risks of a property bubble.
Chang said a shortage of housing supply has been the major factor behind the continuous rise in property prices in the capital, with data showing that housing demand in Taipei exceeds supply by about 80,000 households.
That makes urban renewal a necessity as it could increase housing supply in Taipei by building new apartments with more floors and units.
While demand in New Taipei City (新北市) falls short of supply by more than 70,000 households, Chang said overall demand in the two cities is in line with supply, an indication that extending the mass transportation system to suburban Taipei would also help solve the issue in the long run.
Meanwhile, the ministry is planning to implement new rules concerning income tax revenue on housing sales in Taipei to raise taxes on luxury properties and curb speculative transactions, are which are expected to take effect next year.
However, various lawmakers questioned the ministry’s decision to limit the expansion of the luxury tax in its latest revision of the regulation.
Last month, the minister said the ministry would not change the luxury tax on real estate resold within two years to property resold within three years or more.
Chang said the ministry decided not to change the tax too much because of concerns over the continuing sluggish economic sentiment.
Following the ministry’s submission of a revised draft on the property tax to the Cabinet for review in the current legislative session, Chang said he expects housing prices in Taipei to show a slight increase in the next six months.