The proposed luxury tax seems to have cooled land prices in New Taipei City (新北市), as Farglory Group (遠雄企業團) yesterday won auctions for two plots of land in Sinjhuang (新莊) at prices that were considerably lower than the record levels of last year.
Farglory Land Development Co (遠雄建設) and its sister company Far Glory Life Insurance Co (遠雄人壽) won the bids for two plots — measuring 3,369 ping (11,137m2) and 3,353 ping each — with NT$6.17 billion (US$209.24 million) and NT$6.12 billion respectively, the New Taipei City Government said on its Web site.
This translated into NT$1.83 million per ping for the former plot and NT$1.73 million for the latter, double their floor prices but lower than NT$2.32 million and NT$2.22 million for plots nearby last year
Analysts attributed the fall in price to the government’s plan to tax short-term property transactions, subjecting residential and commercial properties and land to a 10 percent levy if they are resold within two years of purchase. The tax rate would climb to 15 percent of the traded value if the property is sold within one year of purchase.
“The bidding reflected wary sentiment among domestic land developers and life insurance companies given their conservative offers,” said Stanley Su (蘇啟榮), head researcher at Sinyi Realty Co (信義房屋), the nation’s only listed brokerage.
The auctions drew a dozen bidders including Huaku Construction Corp (華固建設), Prince Housing & Development Corp (太子建設), Hung Poo Real Estate Development Co (宏普建設) and Shin Kong Life Insurance Co (新光人壽).
The 20 percent fall in price from the last winning bid suggested that home costs in Sinjhuang and Greater Taipei may see major corrections as land values tend to be more inelastic because of relative scarcity, Su said.
The two plots sit right next to a mass rapid transit line currently under construction that will link Sinjhuang and Taiwan Taoyuan International Airport and are therefore better located than the plots sold last year, Su said.
The auction results echoed a recent survey by Sinyi that 86 percent of prospective buyers expect home prices to shrink 10 percent to 20 percent, with nearly 30 percent expecting corrections of more than 20 percent.
Jeffry Huang (黃增幅), a manager at Evertrust Rehouse Co (永慶房屋), said construction firms appear to share the need for price corrections, as can be seen from their bids.
The market had been unsure how to respond to the intensity of the luxury tax as previous auctions either failed to attract bidders or were called off at the last minute.
Huang expects Farglory to turn the two plots into multi-function residential complexes that promise higher returns.
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