Lower inheritance tax behind housing speculation: lawmaker

By Ted Chen, The China Post

TAIPEI, Taiwan — A lawmaker yesterday urged governing bodies to investigate the tremendous growth in real estate transactions following the reduction of the inheritance tax. Alex Fai (費鴻泰), a ruling party lawmaker yesterday stated that about NT$600 billion worth of capital has been remitted from overseas via various means by Taiwanese businesses, with half of the amount suspected to have been directed towards real estate investments. According to Fai, an estimated NT$250 billion were allocated towards more productive endeavors that assists in Taiwan’s economic growth such as investments in manufacturing plants, but more than half of total overseas remittances were poured into the high-end housing market. As these luxury properties are not inhabited, these transactions are of a speculative intent, said Fai.

In addition, Fai expressed outrage over reports that state-run banks had provided exceedingly favorable home loan terms for members of the Wei family, the owners of the Ting Hsin International Group (頂新國際), essentially only paying 1 cent on the dollar in their purchase of 9 units at a luxury condo complex. “It defies logic that a state-run bank would agree to loans providing 99 percent of a properties purchase price,” said Fai.

According to reports, the central bank previously uncovered anomalous lending by banks in a routine audit of financial institutions. Following the discovery, the central bank immediately mandated all lenders lower home loan provisions to under 60 percent of a property’s purchase price.

Fai also announced that he is gathering data from property developers, the Ministry of Finance and tax bureaus to verify the extant of overlending, housing speculation and improve monitoring of overseas remittances. Fai however, stated that there are numerous technical challenges in data collection hampering efforts in deterring housing speculation activities via the trading of presell home units or contracts.

Meanwhile, amid slashed estimates for new properties slated to be released next year, several upcoming Taipei City luxury condos are poised to breach the so-called Perng Fai-nan line of NT$3 million per ping — approximately 3.306 square meters — a price level reportedly deemed unacceptable by the Central Bank Governor. Real estate industry observers stated that currently there are six or seven development projects that may likely be priced at above the NT$3 million per ping benchmark next year. Total new housing developments on the market next year however, is expected to see a year-on-year decline of NT$80 billion, receding to NT$1.37 trillion compared to the NT$1.45 trillion recorded in 2012.