Taiwan’s opaque real estate market may soon receive a dose of transparency if an initiative by the Council for Economic Planning and Development to publicize housing prices proves effective.
According to a report from Global Property Guide released in April by U.S. news outlet MSNBC, Taiwan’s property prices have gone up 30.1 percent over the past five years, making it the sixth fastest growing market in the world. In the capital, Taipei City, costs have nearly doubled in the same period.
However, for the longest time, buyers have had no reliable pricing reference for the properties on sale, which is why many believe that an online database of real estate transaction prices to be launched in September is a much needed move.
“For decades, access to property transaction prices has been monopolized by real estate agents, and therefore subject to manipulation,” said Legislator Tseng Chu-wei, who has been lobbying vehemently for a taxation scheme overhaul targeting gains from securities and property transactions.
“Homebuyers are simply left in the dark; they have no choice but to believe what the agents have to say; this has been preventing house seekers from making informed decisions,” he said.
As a result, both housing agents and homeowners have made it a habit to withhold actual prices, the former to secure greater profit margins from later buyers, and the latter to keep their finances—or favors received from brokers—confidential.
Amendments to the Real Estate Broking Management Act, Equalization of Land Rights Act and Land Administration Agent Act passed in December 2011, however, require that all property transaction prices be entered into a database, which will be made available for online inquiries, providing information transparency and helping to normalize the market.
In a May 8 interview with Taiwan Today, Hsiao Fuu-dao, director of the Department of Land Administration under the Ministry of the Interior, said, “In fact, the government has always kept track of real estate prices.”
But the paperback quarterly of property transaction prices to which he was referring, compiled with data collected by 108 land offices across the country, documents only about 10 percent of the more than 400,000 annual real estate transactions in Taiwan, he noted.
The new registration system, in contrast, will record all deals, requiring real estate brokers, land administration agents and homeowners to register the price, size and exact location of their properties.
Those looking to buy a home will then have a clearer picture of how much they can expect to pay for a specific apartment, Hsiao said.
Ideally, all the necessary information would be entered into the system accurately and honestly, but in reality, reliability and privacy are issues that the government is still grappling with. And it is precisely these concerns that worry Chang Chin-oh, a professor of land economics at National Chengchi University and director of Taiwan Real Estate Research Center.
In a study set to run through November, Chang is leading a group of researchers trying to spot flaws in the price registration system, find better ways to keep track of prices and identify those who make false reports.
“As long as there are rules, there will be people who try to get around them,” he said. The team is therefore designing models to spot fraud in figures submitted to the system.
“The price registration system must first be accountable before it can change anything in the housing market.”
Chang thinks it is high time Taiwan consumers became better informed. In Hong Kong, Singapore, South Korea and the U.S., for instance, it has long been common practice, if not an obligation, for real estate brokers to provide potential buyers with accurate pricing information. And if their data is insufficient, other sources are available.
A free interactive database on the website Zillow.com, for example, designed to “empower consumers with information and tools to make smart decisions about homes, real estate and mortgages,” has since 2006 kept track of more than 100 million U.S. properties, including homes for sale or rent. The price history, size and exact location of houses and apartments can easily be checked.
Many of Taiwan’s neighbors are taking steps to tackle similar housing issues. Hong Kong, where according to Global Property Guide prices have risen 138 percent over the past decade, passed the Residential Properties Bill in March to enhance transaction transparency.
Under the law, within 24 hours of entering into a preliminary sales agreement owners must register a description of the residential property and the transaction price. Moreover, the provision of false information carries a fine of up to HK$5 million (US$644,000) and imprisonment for as many as seven years. In Taiwan, the maximum fine is NT$150,000 (US$5,068).
Compared to Hong Kong’s aggressive moves, Chang said, Taiwan’s system certainly leaves much to be desired. “The authorities should come up with more incentives so that housing agents and homeowners will be willing to provide truthful information,” he said. “Small fines simply won’t work.”
Another problem in Taiwan is that housing and land sales are taxed according to an extremely underrated base, which can be as low as 40 percent of the real value of the property. Groups such as the Alliance for Fair Tax Reform have been pushing for taxes on actual transaction prices.
Chang said that while the price registration system is undoubtedly a big step toward a fairer taxing scheme, the next step—making it the base for calculating taxes on property sales—is the really difficult one to make, due to fear of a public backlash. “It will probably take three to four more years before this goal can be reached,” he said.
Homebuyers in Taiwan have waited decades for more transparency in property transaction prices. Now the burden will be on the authorities to ensure that the public has ready access to accurate and up-to-date information with which to make informed decisions. (THN)
Write to Kwangyin Liu at kwangyin.liu@gmail.com