Luxury Tax Dampening Housing Transaction

Taipei, March 28, 2011 (CENS)--The impending levy of luxury tax on housing speculation has started to dampen the realty market, as evidenced by the plunge in prospective housing buyers visiting the construction sites of new housing projects and large numbers of order cancellation for the ongoing major sales season in late March and early April.

A major sales agent estimated that the total value of new housing projects rolled out in the season may reach only NT$100 billion in northern Taiwan and there are few new projects in southern Taiwan. The former figure is a far cry from the projection of NT$260 billion made by “My Housing” magazine previously.

Despite sharp downturn in demand, most developers are still holding to their high asking prices, in contrast with the status of the second-hand housing market, where many speculators have slashed their prices in a rush to dispose of their property holdings.

Market players noted that developers and sales agents for new projects refrain from price cut, lest the move would cause a panic among buyers and accelerate the trend of order cancellation. Anyway, after seven years of bullish market, both developers and sales agents have deep pockets to hold out for quite a while.

Ho Ying-yu, a sales agent, noted that under the impact of the luxury tax, many developers have deferred the rollout of new projects or maintain a low profile for projects which have been launched.

Ni Tzu-jen, manager of “My Housing,” remarked that since the publication of the luxury tax, numbers of prospective buyers visiting major construction sites have plummeted by 30-50%, with the impact being the most serious in New Taipei City, such as the sub-urban center of Xinzhuang and Linkou.

Billy Yen, president of DTZ Taiwan, stated that rapid shrinkage of housing transactions is inevitable, under the impact of a string of the government's anti-speculation measure, adding that the market has become stagnant, due to reluctance of sellers to cut prices, despite sharp decline in demand.

Yen believed that the stagnation will last for one month, before sellers start to make concession in asking prices, in order to dispose of their holdings avoid the levy of luxury tax starting in May.