Taiwan Plans Tax, Valuation Rules to Curb Property Speculation

Taiwan is considering a new property tax on real estate sold within a year of purchase and plans to revise land valuation rules to further quell the risk of overheating, the government said.

The tax will be aimed at investment properties and not those who own their homes, said Ching-hua Lee, chief secretary at the Ministry of Finance. Land valuations will also be revised more regularly to ensure taxes reflect market changes, said Wang Ching-hsiu, a deputy director of the Interior Ministry.

“A new tax burden should discourage short-term investors from speculation in the property market and could help curtail prices,” Cheng Cheng-mount, chief economist at Citibank Taiwan Ltd., said by phone today. Previous credit-tightening measures have failed to curb real-estate prices, the economist said.

Taiwan’s central bank on Sept. 30 increased its benchmark interest rate by 0.125 percentage point for the second time this year after a jump in home prices fueled concern the island’s economic recovery may stoke a property bubble. Prices in the capital rose 7 percent from December 2009 to the end of September, said Stanley Su, an analyst at Sinyi Realty Co., Taiwan’s biggest real-estate brokerage.

The government is studying the tax “and we hope this would discourage speculation,” Lee told reporters in Taipei today.

The tax on property sales could be as high as 30 percent, the Taipei-based Economic Daily News reported, citing an unidentified official at the Ministry of Finance. Lee said the ministry hasn’t decided on the tax rate.

Revising Valuation Policies

A gauge of 36 construction and building companies in the Taiex index fell 2 percent at the close in Taipei trading today, the worst performer among 28 industry groups. Farglory Land Development Co., the island’s biggest property company, lost 1.6 percent, the most in more than a week. Cathay Real Estate Development Co. dropped 2.5 percent, the most since Nov. 15. Prince Housing & Development Corp. retreated 2.7 percent.

Taiwan also plans to revise its so-called published property values every year starting as early as the second half of 2011, said Wang, who works at the Interior Ministry’s land department. The benchmark for annual real estate taxes is now revised every three years.

The so-called declared land values, used to calculate taxes on the increase in the worth of properties, will be revised when necessary to bridge the gap with current market prices, she said. Those valuations are now revised yearly.

“We will act to enhance taxation fairness as investors who buy and sell land within the same fiscal year won’t be taxed against gains under current land value increment tax rules,” Wang said.

More Tightening

The central bank and financial regulator tightened lending procedures to ensure the quality of loans after banks on the island of 23 million people cut mortgage lending rates to the lowest since records began. Plunging rates drove prices of residential property in the greater Taipei area up by 20 percent last year, according to Sinyi Realty.

The increase in home prices has made it more difficult for first-time buyers to purchase properties. In response, the Cabinet last month asked eight banks partially owned by the government to offer up to NT$200 billion ($6.6 billion) of mortgages at lower interest rates.

People aged between 20 and 45 from Dec. 1 are eligible to apply for loans up to NT$5 million per household for a maximum of 30 years at an annual interest rate of 1.5 percent for the first two years, lower than the average 1.62 percent. First-time home buyers can borrow up to 80 percent of the property value.

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