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Taiwan property market correcting, looking for soft landing: DBS Group

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by December 14, 2016 General

CNA
December 15, 2016, 12:02 am TWN

TAIPEI — Taiwan’s property market is currently undergoing a correction and the capital gains tax imposed on housing sales could continue to impact the home market, although the local economy has showed signs of improvement, Singapore-based DBS Group said on Wednesday.

Over the longer term, the local property market is expected to have a soft landing after the current correction, the Singapore banking group added.

Ma Tieying (馬鐵英) , an economist at DBS Research, said that after 10 years of climbing, home prices in Taiwan hit a peak in 2014 before trending lower in 2015, since when the economy slowed down.

The local property market, Ma said, has also been impacted by the earlier efforts of the Central Bank of the Republic of China to tighten credit controls on home purchases and a tax reform introduced at the beginning of this year. She said there was no question Taiwan’s property market has entered a period of correction.

The DBS economist said that the new tax regime which was designed to rein in skyrocketing home prices is expected to depress the local property market into 2017, despite the economic recovery.

The new tax rules took effect on Jan. 1, with the government slapping capital gains tax of up to 45 percent on people who sell their commercial or residential property within a certain period of time from the date of purchase.

The DBS comments on the property market echoed a recent forecast by local analysts, who said that as long as potential home buyers expect housing prices to fall further, they will be reluctant to jump into the market and likely to remain on the sidelines.

As a result, transactions of residential and commercial housing could dip to 250,000 units or lower in 2016, compared with 292,550 units in 2015, according to a recent forecast.

A report released by real estate market magazine My Housing (住展雜誌) last week showed that the housing index, which measures the market outlook, trended lower in November and flashed blue, which signals a contraction. The silver lining is that economic momentum is expected to pick up in 2017, Ma said, adding that with low interest rates and the central bank starting to ease credit controls, the local property market could secure a soft landing over the longer term.

Ma said that with increased urbanization in Taiwan and a fall in the size of families, local housing demand is expected to increase.

According to DBS, Taiwan’s current urbanization rate is 79 percent, lower than South Korea’s 82 percent, Japan’s 93 percent and Hong Kong and Singapore’s 100 percent. As such, there is room to push up housing demand in Taiwan.

DBS said that the average number of people in a single household in Taiwan fell from 4.2 in 2010 to 3.5 in 2015 and is expected to keep falling due to increased urbanization.

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