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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. Thereafter, to address the overconcentration of real estate credit undertaken by banks and curtail short-term speculation, the central bank, Ministry of Finance and other government agencies amended laws and refined relevant measures in 2020 and 2021. The goal is to build a healthy real estate market through curbing speculation, combating real estate tax evasion, and reducing excess market liquidity.

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. Once the sale officially begins at a higher price, speculators profit by selling these purchase orders to later buyers. To combat such practices, presold house purchase orders are regulated and prohibited from resale to third parties. Joint audits targeting this kind of speculation are also enhanced.

■ 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 are also 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. 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 rental management program. Rent subsidies will also be expanded to benefit 120,000 households per year, up from 66,000 currently.

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