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Building a healthy real estate market


On December 3, 2020 the Executive Yuan approved the Healthy Real Estate Market Plan to strengthen regulation of real estate transactions and expand social housing and rent subsidies. To curtail short-term speculation of real estate, in July 2021 amendments to two laws regarding income tax on house and land transactions came into effect, and on January 10, 2023 the revised Equalization of Land Rights Act passed its third reading by the Legislature. These, in addition to a range of other measures implemented by the government, will set the real estate market on a healthy development path by curbing speculation, combating tax evasion and reducing excess liquidity to achieve housing justice and build high-quality living environments.

Five 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 deposits—in addition to profit-making through real estate swaps. Once the sale officially begins at a higher price, speculators profit by selling these purchase orders to later buyers. To combat such practices, regulation of presold house purchase orders and real estate swaps has been tightened up to deter entities from using fictitious transactions to artificially inflate real estate prices.

■ Promote amendments to the Equalization of Land Rights Act: Major amendments include restrictions on reselling and swapping of sales and purchase agreements (SPAs) for presold houses or new buildings; the introduction of a permit system for purchases of residential property by private entities; prohibiting real estate speculation and requiring the registration of contract cancellation for presold houses; and establishing a whistleblower reward scheme to encourage the public to supervise real estate sales and transactions and report any evidence of actual transaction prices that have not been accurately registered, in order to curb speculation within the market.

■ 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. Furthermore, income taxes for profit-seeking enterprises are calculated based on rates that depend on the length of time property is held, as is the case for individuals. This will eliminate the practice of individuals establishing corporations to engage in short-term property speculation. Rules are also being 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 are 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 have also been 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 established the National Housing and Urban Regeneration Center, and has worked together with local governments to complete construction of 120,000 social housing units as targeted. Incentives for private landlords have been increased to drive their participation in a subleasing and management program. Rent subsidies will also be expanded to benefit 500,000 households per year, up from 66,000 previously.

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