On Dec. 7, and without prior warning, the central bank proposed four targeted financial control measures that went into effect the next day.
This move has been the focus of widespread attention and has sent shock waves through the heated real-estate market.
Construction companies and investors have expressed extreme displeasure, while real-estate agents are worried that the measures could cause a wave of withdrawals from deals.
Their reactions show that the central bank’s measures are having the desired effect with respect to curbing property speculation.
Hot on the heels of the central bank, the Ministry of the Interior re-proposed a set of legal amendments known as “actual transaction price registration 2.0,” which was approved by the Cabinet on Dec. 10 and forwarded to the Legislative Yuan for deliberation.
The most crucial question is whether the legislature will pass the amendment that demands prompt registration of property presale agreements.
Another worrying question is how to ensure that transaction price registrations of presale and completed properties are not falsified.
Although the fine for false registration of property prices has been raised to NT$750,000, that penalty will obviously not have much of a deterrent effect when properties often change hands for tens of millions of New Taiwan dollars, or even hundreds of millions of NT dollars in some cases.
It would be a good idea to use a large-scale valuation model to effectively screen for falsified cases, in combination with classifying serious and intentional acts of falsification as fraud and punishing those responsible accordingly.
Only by doing so can we achieve the goal of deterring false declarations of property prices.
In addition, with regard to the problem of speculation on presale housing reservation receipts and sales practices that are designed to push house prices upward, amendments should also include strict controls, establish an effective checking mechanism and strictly prohibit transfer sales of presale reservation receipts.
Agents who contravene such regulations should likewise be charged with fraud rather than false advertising and punished accordingly.
Regarding actual transaction price registration, the most-needed improvement would be to publish information on the rental market.
The majority of renters belong to disadvantaged groups who are in greater need of information and assistance.
Notably, the rental black market is particularly serious in Taiwan, and housing quality and rents are not open and transparent.
At present, only properties rented through agents are required to be registered, and this only accounts for a very small percentage of arrangements.
Consequently, renters have no way of grasping the going rate for rental properties or their relative quality.
The lack of a “whistle-blower” clause also causes a serious problem of tax evasion by landlords.
Fixing the rental market should be the priority task for actual transaction price registration to tackle and resolve.
Hopefully, the proposed amendments would improve the situation.
The Ministry of Finance recently said that it would within two years discuss raising the upper limit for local authorities’ house-hoarding tax rates and that it would by next year at the earliest adjust the threshold for taxing properties, among other measures.
The finance ministry’s national taxation bureaus are also to launch three major tax investigation projects.
However, can these measures achieve the result of curbing property speculation and fixing the housing market?
House-hoarding tax reform is of great concern, as the very low cost of owning an unoccupied home is the key defect of Taiwan’s housing market.
Considering how long such a reform has been discussed, along with local governments’ experience of implementing the tax, the finance ministry should clearly understand the problem and its effects.
Taipei Times readers might remember the so-called “two Changs’ meeting” of April 2014 between then-minister of finance Chang Sheng-ford (張盛和) and myself when I was deputy mayor of Taipei, during which we discussed the house-hoarding tax, which was passed into law in May of the same year.
We are now being told that house-hoarding tax reform needs to be discussed for another two years. This falls far short of what society expects.
As for house-hoarding tax reform, with regard to who fits the definition of a non-owner-occupied home hoarder, should we go by the central bank’s proposed standard that defines them as those who own a third home rather than a fourth one, as is currently the case?
In addition, it should be possible to gradually increase the tax base for the house-hoarding tax by referring to actual transaction price registrations, and the tax rate should increase progressively with significant increments.
It would be preferable for the tax rate and increments to be set by the central government to avoid having “one country, multiple systems.”
The finance ministry could also use coordinated allocation of funds to press local governments to implement the house-hoarding tax effectively.
Considering the current ineffectiveness of the tax and the high expectations of people in all walks of life, the finance ministry should have considerable room for improvement.
This would make a crucial contribution to fixing the housing market.
With respect to short-term measures and the tax bureaus’ three major tax investigation projects, big individual and corporate investors in the housing market, and non-compliant agents, can also be targeted by tracing the source of their capital.
Effective audits that catch the big fish and let the minnows go, along with publishing the audit results, would surely achieve the effect of curbing property speculation.
At present, the central bank’s four measures are the only ones getting scrutinized by the public. For the central bank, financial controls are the only tools available to curb property speculation.
The measures will therefore have limited effect and cannot be the center of a long-term strategy for fixing the issue.
Taiwan’s housing market and property prices have been irrational for a long time, leading to the simultaneous occurrence of the seemingly contradictory “three highs” — high housing prices, a high vacancy rate and a high ownership rate.
The fundamental problem is the defective market mechanisms in the real-estate market.
Government agencies and departments must do their part to fix it. The only way to thoroughly correct the housing market is by establishing a long-term system of laws and regulations.
Hopefully, the government’s plan for improving the housing market can make it more rational and give young people hope for their future housing needs.
Chang Chin-oh is an honorary chair professor at National Tsing Hua University’s College of Technology Management.
Translated by Julian Clegg
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