Taipei Times: With an enormous market glut -- an estimated 1.25 million vacant residential units nationwide -- and more than NT$500 billion of bad loans tied up in real estate, the property market remains static. How much longer do you expect this situation to continue?
Calvin Wang (王治平): There aren't many transactions because most sellers are keeping their prices high, which unfortunately are much higher than buyers are willing to accept. But eventually the market will self adjust. The government will alter some policies to encourage transactions. This should happen very quickly but will be subject to how the government deals with the non-performing loan issue.
The government is also reviewing the "go slow policy" and opening the market to foreign investors, including money from China. Setting up direct flights with China will impact the market as well.
TT: What are the hard core structural problems behind the current troubles in the real estate market?
Wang: The regulatory structure is the first problem. Most transactions are still conducted privately and are not registered with the government. As a result, the market simply is not transparent enough. In comparison, the US and Australia have close to 100 percent transparency. The next level in Asia is Hong Kong and Singapore. Most purchase agreements in Hong Kong are registered with the government so everybody can access the data very easily. We don't have that kind of system. Some people in the private sector are pushing the government to form a kind of real estate center to consolidate all the transaction information.
TT: What concrete measures have the government taken so far to improve the regulation of the market?
Wang: There's going to be a license system for brokers in place starting Feb. 3 next year. Hopefully after the broker testing [system is implemented], industry work ethics will improve so we'll have less monkey business with under the table dealings and money laundering.
This has been terrible [for the industry] and is why the market is very difficult for any legitimate company to work in. Another positive improvement is that in less than five years the government will institute new regulations whereby appraisers must have a license just like those awarded to certified public accountants. Once they pass a national test, they will be given a license. Currently, anybody can do a valuation, but in the future only licensed people will be able to do so.
Then there is the economic issue. The fundamental problem today is user demand. What real estate does the end user need? What investor will develop an office building if nobody will lease the space? So the fundamental issue with the economy is still demand. The real demand depends on who wants more space. Who wants to expand their retail space. The issue today is how to create more demand in the market. Demand must be generated by a change in government policy, like direct trade with China and the multiplier affect of accepting Chinese tourists in Taiwan.
TT: Did you think the proposal to cut the land value incremental tax is a reasonable way to stir up incentive in the market?
Wang: I don't think it would be helpful. Actually, there are a lot of problems with it. The tax savings are limited and the government only considered a two-year time frame. What happens after two years? It's not a real solution for this issue. The real solution is to try and increase demand.
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