Unaffordable housing in Taiwan has been a top public grievance for many years and housing justice tends to become a hot topic of discussion in an election year. That the nation has one of the highest ratios of housing prices to family income in the world confirms the severity of deteriorating affordability, and the government has been hoping to change that by implementing several measures in the past few years, with the latest measures announced last week to target “house hoarders.”
On Thursday, the Ministry of Finance proposed applying different tax rates on housing based on an owner’s total number of residential properties nationwide, with owners of multiple properties that are not in use paying more tax. The plan, which is subject to lawmakers’ approval, aims to raise the tax rate on multiple properties to between 2 and 4.8 percent of their value, up from 1.5 to 3.6 percent, while reducing the rate to a flat 1 percent, from 1.2 percent, on owners’ first self-occupied dwelling.
Apart from aiming to curb property hoarding more uniformly and effectively nationwide, the ministry also plans to lower the maximum tax rate on rental houses to 2.4 percent, from 3.6 percent, as it wants to encourage owners of multiple houses to put some of them back on the market for leasing, and decrease the number of unoccupied properties in the nation. This measure is expected to assist people who cannot buy a home to find affordable units for rent, the ministry said.
About 360,000 houses are expected to be taxed at a higher rate under the new plan, while 3.28 million households would benefit from lower taxes, according to the ministry’s estimates, which hopes to implement the new plan in July next year, and the new tax rates to take effect in 2025.
The new plan comes as the latest data released by the Ministry of the Interior in April showed that the national house price-to-income ratio reached 9.61 in the fourth quarter of last year, while the ratio in Taipei was 15.77, meaning that it would take an average income earner in the capital nearly 16 years to buy a home without any other spending. Furthermore, mortgage payments in the fourth quarter of last year took up 40.25 percent of the national average household income, suggesting home affordability remains low, although it was down 0.3 percentage points from the previous quarter.
The latest plan follows the implementation of the integrated house and land transaction income tax in 2021 — which left sellers facing income taxes of 45 percent on property transaction gains on houses sold within two years of purchase, and 35 percent of gains on real-estate sales made within two to five years of purchase — and several new measures that come into effect this month to set up heavy fines for market manipulators and curb speculation in the presale property market.
However, reactions to the new policy have been mixed. Some experts question whether it would have much impact on the market and force house hoarders to offload their properties in the short term, while others said that it at least represents a crucial step toward housing justice, although long overdue.
Housing transactions have decreased this year. If the situation continues in the next few quarters, home prices might start to show a moderate decline amid the spate of unfriendly policies launched by the government.
However, if the government is determined to make it easier for people to afford homes in the long term, it needs to do more to prevent housing problems from threatening Taiwan economically and socially. That would demand that policymakers focus more on boosting incomes, increasing the amount of social housing, regulating the rental market and revisiting the central bank’s monetary policy.
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