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Building a healthy real estate market

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On December 3, 2020 the Executive Yuan approved the Healthy Real Estate Market Plan, a package of measures aimed at curbing speculation, amending sale-price registration legislation, combating real estate tax evasion, reducing excess market liquidity, and expanding social housing and rent subsidies. The goal of the plan is to build a healthy real estate market and bring about housing justice through better management of market behavior and increased access to quality residences.

Principal measures

■ Curb presale speculation: Local real estate markets have seen speculation in "purchase orders" for presold houses—which offer agreed-upon sale prices—issued by builders or agents on receipt of speculator deposits. Once the sale officially begins at a higher price, speculators profit by selling these purchase orders to real buyers. To combat such practices, diagnostic indicators tracking both transaction behavior and prices relative to supply and demand are being compiled. Joint audits targeting this kind of speculation will also be enhanced.

■ Amend laws to require prompt registration of true sale prices: Previous law required registration of sale prices by district only whereas current law requires registration by property address. Amended legislation now mandates that actual sale prices for specific properties be filed before closing, then promptly registered and publicly posted when transactions go through. Purchase orders for presold houses will also be regulated and prohibited from resale to third parties. These changes will provide for more timely, transparent and accurate real estate transaction data.

■ Crack down on tax evasion: The tax code has been amended to require that short-term transactions be heavily taxed. Income associated with equity transactions in unlisted corporations must now be reported together with personal income for tax purposes. This will eliminate the practices of establishing corporations to buy and sell property and thus take advantage of the lower corporate real estate transaction tax rate, as well as transferring shares in property-holding corporations to achieve the effect of transferring real estate tax-free. Rules will also be amended to prevent owners from subdividing single, high-value properties into many low-value units to evade property taxes.

■ Prevent excess liquidity flooding property markets: Banks will be supervised and encouraged to exercise caution when extending credit to finance new residential construction by developers and the purchase of residential real estate by investors for other than personal use, while selective credit control measures will also be adopted. To strengthen management of credit risk at financial institutions, special audits of real estate credit extension as well as standard operational auditing will continue, bolstered by already-announced risk management measures.

■ Boost market for social housing: The central government will build 66,000 social housing units and expand rent subsidies to cover 120,000 households per year, up from 60,000 currently. Incentives for landlords will also be improved to accelerate their participation in a managed subleasing program.

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