Growing demand in the real-estate market continues to drive up housing prices and trigger speculative transactions, and last week prompted the Ministry of the Interior to draft amendments to the Equalization of Land Rights Act (平均地權條例) and the Real Estate Broking Management Act (不動產經紀業管理條例) to curb speculative transactions in the presale market.
The measures include stricter requirements on the resale of presale reservation receipts, stiffer punishments for market manipulation and speculation, and prohibit housing transfers within five years by a “private legal person” — any entity that can act as a person under the law. They also require disclosure of contract termination for presale housing within a month, and the establishment of whistle-blower and reward mechanisms for reporting fraud.
Under the changes, people who try to influence presale transaction prices, create a false perception of hot sales or profiteer from the resale of presale reservation receipts face fines of NT$1 million to NT$5 million (US$36,053 to US$180,265). If such behavior leads to market panic that harms the interest of others, offenders would face up to three years in jail or fines of NT$1 million to NT$50 million.
Presale homes are a convenient way for first-time home buyers or investors to enter the housing market. During an uptrend, the returns could be lucrative, as home prices increase during the construction phase. It is also a gamble, as the market could swing the other way.
Property market cycles have been closely tied to the nation’s external balances, which is not surprising as the local economy is closely tied to shifts in the global economy. Over the past few years, Taiwan has seen a sustained buildup in external surpluses and domestic liquidity due to steady economic growth, while businesses returning to Taiwan and the government’s encouragement of domestic investment, coupled with low interest rates and solid domestic savings, have driven the real-estate boom, which is a macro phenomenon similar to what has been observed in Hong Kong, Singapore and South Korea.
The continued rise in home prices and growing disorder in the presale market in the past few years have caused panic among consumers and prevented real demand from being met, which has further triggered an increase in presale prices. This creates a vicious cycle and is a blow to housing justice. The stricter regulations and heavier penalties the ministry is proposing aim to increase investment costs for speculative property investors, stop developers from employing a hungry marketing strategy to create interest in presale projects and return the market to rational trading with reasonable prices.
The amendments follow a spate of government measures implemented since late last year to curb speculative transactions in the real-estate market. The Executive Yuan still has to approve the latest proposals before the legislature can deliberate on them. Some are praising the move as a way to address problems related to the resale of presale reservation receipts and fake transactions, while others criticize it as an ineffective means to curb housing speculation that would instead drive more transfers of presale reservation receipts behind the scene.
The amendments are an important step to curb real-estate speculation and promote housing justice, and it is necessary to scale up punishments for ill-minded speculators and developers, as homes should not be a market commodity. However, there is still room for deliberation regarding their implementation to avoid harming home buyers, both individuals and private legal persons, in a free-market economy.
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