A housing construction project near an MRT station on Xinsheng North Road in Taipei. (Photo/Fang Chun-che)
Taiwan's minister of finance Chang Sheng-ford warned on Wednesday that Taipei's property prices are extremely expensive, in what appears to be a property bubble, prompting the ministry to revise its taxation principles in order to curb speculation, in measures slated to be implemented from next year, our sister paper the Taipei-based China Times reports.
Currently, tax income from the levy of luxury tax and from investigations into housing tax evasion has exceeded NT$10 billion (US$338 million), and there is still large room to expand such income, Chang said. Although stability in both the domestic and international economy is not certain at the moment, Taipei's property prices still have the potential to rise further, the report said.
Chang believes Taipei's high property prices are caused by an insufficient property supply as demand exceeds supply by around 80,000 houses, while New Taipei sees supply exceeding demand by more than 70,000 houses. Since Taipei currently has no vacant land, only by implementing urban renewal projects can the city increase its property supply, he said.
Currently, there are lots of two-story and four-story houses more than 30 years old in Taipei, and urban renewal projects could increase housing supply and drive down property prices, Chang said.
The ministry plans to implement new rules regarding tax revenue on housing sales in Taipei to raise taxes on luxury properties and contain speculative trading, which are expected to take effect next year, Chang said.
The ratio of home prices to incomes averaged 12.4 in Taipei, much higher than the international standard of 5, said Yang Chin-long, deputy governor of the central bank.
Regarding the possible property bubble, the eight major state-run banks led by Bank of Taiwan are confident that they can weather a 10% or even a 20% drop in property prices, which occurred during the Asian financial crisis in 1997, but if property prices tumble 30% like in the 2008 global financial crisis, two of them, Taiwan Cooperative Bank and Taiwan Business Bank, said they will face serious financial woes.
The deputy mayor of Taipei, Chang Chin-oh, a property expert, said only through reform in tax policy can the problem of high property prices be resolved.
Tthe property tax is currently too low, allowing speculators to own many houses that they don't live in, Chang said. He urged the government to significantly raise property taxes for people owning more than two or three houses that are not for their own use, to curb speculative transactions.
Chang Sheng-ford 張盛和
Yang Chin-long 楊金龍
Chang Chin-oh 張金鶚