Taipei Times: Would you comment on the company’s business outlook for the second half of the year?
Timothy Ma (馬玉山): We are cautiously optimistic about the market ahead, providing there is no major bad news on the domestic economic front. More and more economists have been voicing concern over a soft patch in the economy. The housing sector cannot thrive on its own when all other sectors are shrinking during an economic downturn.
This year, Kindom aims to launch NT$12 billion [US$405 million] worth of presale and newly completed housing projects, mainly in Sinjhuang (新莊) and Sanchong (三重) Districts of New Taipei City. They fall in the medium to upper-medium end of the pricing spectrum.
Photo: Chang Chung-yi, Taipei Times
I have no data to comment on the performance of the housing sector overall. The company, whose businesses encompass land development as well as housing construction and sales, has seen its revenue pick up 20 percent so far this quarter, compared with the first quarter. Last quarter, Taiwan’s housing transactions slumped to a decade-low, partly because of domestic political uncertainty.
Kindom’s revenue improvement may also have to do with expectations of consumer goods price hikes, as real estate has proved a good hedge against inflation. There is no empirical proof to substantiate a tie between housing prices and inflationary pressure, though.
TT: Will Kindom adjust prices amid growing downside risks and plans by the central bank to tighten credit control on luxury housing?
Ma: I do not see a need to lower prices for Kindom projects. The company has no plans to develop luxury housing projects, but I have reservations about discrepant financing terms.
To begin with, there are only a few luxury housing units nationwide. The Taipei City Government put the number at more than 23,000 last year, but recently revised it down to 2,900. The central bank should not allow them to affect its policymaking. The central bank should give more leeway for the market to regulate on its own accord.
Europe’s debt crisis has been around for quite a while. While it is shaking the global economy and financial markets, the impact on the domestic real estate market is limited.
Their fiscal woes have prompted European nations to cut spending and their central banks to keep interest rates low to stimulate economic growth. For similar reasons, the US Federal Reserve may introduce a new wave of quantitative easing, indirectly releasing more funds available for real-estate investment and thereby boosting prices. This scenario [and the effect it brings] is worth thinking about for economists and industry experts.
TT: What are your views on the proposal to tax capital gains on real-estate transactions?
Ma: It is harmless to discuss the issue, but its implementation would be a different matter, given the high percentage of home ownership — estimated at 85 percent. It would cause a far greater stir than the proposed levy on securities investments. Policymakers should reconsider the proposal as a levy could stall the economy.
Technically, such a tax would be impractical because of a lack of data to judge the real value of the nation’s more than 8 million housing units. It will take several years to build the database once the registration requirement for housing transactions takes effect later this year. The transparency rule will only impact homes that change ownership, leaving the prices for the rest still unknown.
Not until the government gathers sufficient data can it fairly tax capital gains on real-estate investments.
The registration requirement will not have a negative impact on Kindom, which has filed its financial results based on real transaction figures, as required of a listed company.
TT: Would it not be healthy to make more equitably distribute the nation’s wealth through tax reform?
Ma: The proposed capital gains tax on securities transactions has drawn heated discussion, with the business sector, academics and politicians giving different views. The debate is positive, and it may benefit the nation’s fiscal health and distribution of wealth in the long run.
It is reasonable for those who earn more to pay more tax. The government surely should not allow a minor few to affect or block its policymaking. However, the government must take the timing and methods of reform into consideration, while seeking to advance fairness and social justice. The worsening European debt problem and declining exports merit a cautious approach.
It is better to postpone measures to increase the national treasury and tax base as they will inevitably weaken investment and consumer confidence. The public’s resistance to the tax plan will subside when global and domestic economic conditions show solid signs of stabilization.
TT: Are Taiwan’s housing prices reasonable?
Ma: To answer the question, we should not only examine per capita income at home, but also international housing price levels. Cross-border investors should compare housing prices in different countries before reaching purchase decisions. Housing prices in Beijing and Shanghai have advanced faster than those in Taipei in recent years, but few would dismiss the trend as unreasonable.
The root of the problem lies in Taiwan’s wages, which have failed to catch up with the pickup in housing prices, thus fueling complaints about increasing unaffordability. The government’s fair housing program — under which the government joins forces with private firms in developing low-priced housing — may help, though it is not a solution.
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