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ECFA to blame for property boom
Thursday, Feb 04, 2010, Page 8
Amid public complaints about soaring property prices, the Taipei City Government
said on Tuesday it would raise taxes on luxury apartments starting in July next
year, with other cities and counties expected to follow suit. This “solution,”
however, fails to address the critical problem of lack of affordable housing and
at most, would only make a small dent in the income of owners of high-end
properties.
Take a 245 ping (800m²) apartment at the upscale Treasure Palace complex in
Taipei as an example, where the owner currently pays an estimated NT$150,000 in
annual property taxes. Under the new regulations, wherein property taxes could
rise by as much as three times, the owner will have to pay NT$450,000 starting
next year. This is merely a drop in the bucket for owners who can afford to pay
between NT$150 and NT$170 per ping per month, or nearly NT$500,00 per annum, in
property management fees.
The tax hike also represents a disproportionately small rise compared with the
surge in the property’s value, which has doubled to around NT$400 million since
2006, and could climb another 30 percent once Taipei signs an economic
cooperation framework agreement (ECFA) with Beijing by the end of the year if
domestic realtors’ forecasts hold true.
Even if the property’s value were to see only a minor 10 percent rise by the end
of this year, a capital gain of NT$40 million from selling the property would
still enable the owner to pay the city government’s new tax for another 100
years.
In the interest of equitable taxation, it is reasonable then for the city
government to take back a small share of the property boom expected from
President Ma Ying-jeou (馬英九) administration’s pro-China policies.
To promote a fairer tax system, some have called for the Ministry of Finance to
impose a higher tax rate on incremental capital gains from high-end properties,
although opponents of this proposition argue that this would hurt domestic
consumption.
Other than tackling soaring high-end property prices, however, the government
has failed to address more urgent issues that affect the general public.
Middle-market properties have also shot up in the past year on expectations that
the ECFA would lift the economy. This is an issue that the government should
have prioritized, but it has not provided any concrete measures except for plans
to build an affordable housing project in Linkou (林口) in four years.
Debate is still raging on whether middle-income earners will benefit from
signing an ECFA with China. Even if they do, the gains they make may not be
enough to allow them to catch up with the soaring value of real estate. And
their housing plight will only worsen if the ECFA undercuts their jobs and hurts
the local economy.
The nation’s low-income families are the most vulnerable to the Chinese trade
pact or any property boom. If the government is hoping that an ECFA would bring
about a property boom similar to what happened in Hong Kong after it signed a
closer economic partnership arrangement with China in 2003, it had better think
ahead how it could keep the low-income families from further plunging into
poverty as happened in Hong Kong, where 1.23 million people — or nearly 18
percent of its population — were living below the poverty line as of the first
half of last year.
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