Builders and developers yesterday welcomed a provisional tax cut on unsold houses, but said that homes ready for sale should be spared from the tax intended to curb property hoarding.
The Taipei City Council on Wednesday approved a proposal to reduce the so-called “property hoarding tax” for unsold houses from 3.6 percent to 1.5 percent for three years, effective immediately.
“The tax cut is positive, but more needs to be done to reinvigorate the property market,” the Real Estate Development Association of Taipei said.
The association urged the city government to remove the tax altogether on the grounds that all newly completed houses are intended for sale, like inventories in the manufacturing industry, and should be spared from punitive taxes if they fail to attract buyers.
The city government in 2014 raised the tax from 1.2 percent to 3.6 percent for owners of multiple homes regardless of their purpose to help stem property speculation amid growing complaints about unaffordability.
A spate of tax hikes between 2011 and 2014 increased holding costs for upscale homes in Taipei 30 times, virtually freezing transactions, the association said.
City councilors also extended the tax cut for two years for unsold houses built between 2014 and the first half of this year, reducing the tax burden on builders and developers.
The tax losses are estimated to be NT$350 million (US$11.44 million) per year, the Taipei City Government said.
Continental Development Corp (大陸建設) chairman Christopher Chang (張良吉) said policymakers should limit the hoarding tax to people who possess multiple homes, and exempt developers and builders from it.
Indiscriminate implementation of the rules has meant that construction companies bore the brunt instead, Chang said.
“All builders want to sell homes as soon as possible so they can move on and develop new projects elsewhere, but the market has the final say on the matter,” Chang said.
Yuanlih Construction Enterprise Group (元利建設) said the city government should not set a time limit on the tax cut, as the market might need more time to recover, especially for high-end housing.
The two-year respite for unsold houses built in the past three years would violate the principle of fairness and equality, the developer said.
Chang Chin-oh (張金鶚), a land economics professor at National Chengchi University, disagreed, saying the hoarding tax was intended to facilitate price corrections so that buyers would rejoin the market.
The tax cut would serve only to protract the correction, he said, adding that unaffordability, not property taxes, had slowed transactions.
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