(Updates with stock prices in ninth paragraph.)
Jan. 6 (Bloomberg) -- Taiwan’s presidential candidates have vowed to rein in property prices by imposing new taxes, making surging housing values a key political issue.
President Ma Ying-jeou, the Kuomintang party chairman who is seeking re-election on Jan. 14, and opposition Democratic Progressive Party chairwoman Tsai Ing-wen both said they would introduce a capital gains tax on transactions of properties to curb speculative buying. Tsai plans to draft the law within a year, Apple Daily reported on Dec. 18.
The new taxes will add to Ma’s earlier efforts to fight real-estate speculation that led housing prices in the capital Taipei to more than double since 2000 and reach a record high in September. Ma has introduced a 15 percent tax on some homes sold within a year of purchase, and a 10 percent levy on some sold within two years.
“It’s quite clear that the rise in property prices is driven by investors speculating on the market, and that’s a bubble,” said Frank Lin, a Taipei-based analyst at CLSA Asia- Pacific Markets. “That has become a social issue and will be one of the most important election topics, not just this month, but in the future as well.”
Tsai, who has been campaigning on promises to narrow the wealth gap and contain property prices, said Ma’s administration had failed to look after the less privileged.
Ma was widening his narrow lead over Tsai in public opinion polls taken prior to a blackout period for voter surveys that began Jan. 4. Taiwanese law bars publication or release of polls 10 days prior to presidential elections.
Taiwan’s home prices are set to fall this year with the new taxes, according to CLSA, which commissioned Gallup MRC Taiwan to conduct public opinion polls to help determine the outcome of the election next weekend.
Housing prices in Taipei are set to decline 10 percent this year, said Lin, while those in areas including New Taipei City, the metropolitan area outside of the capital with one of the highest vacancy rates on the island, may face a drop of as much as 20 percent, he said.
Farglory Land Development Co., Taiwan’s biggest construction company, fell 0.9 percent to close at NT$47.85, while Cathay Real Estate Development Co. lost 1 percent to NT$10.25. The benchmark Taiex index slipped 0.2 percent.
The average price of existing homes in Taipei dropped 2.3 percent in November from a record NT$571,000 ($18,870) per ping (36 square feet) in September, according to Sinyi Realty Co. Transactions slipped as much as 38 percent in the fourth quarter, the island’s biggest real-estate brokerage said.
The central bank tightened mortgage lending rules in 2010.
Signs of a slowdown in the U.S. and Europe will hurt Taiwan’s economy, adding to uncertainties in the property market, according to CLSA and Sinyi Realty. Exports account for more than two-thirds of Taiwan’s gross domestic product.
“The economy is a big unknown facing us at the moment,” said Stanley Su, chief analyst at Sinyi Realty. “Differences in the policy directions of the candidates will add to uncertainties. If we have a political change of power, potential buyers may be even less willing to make bids.”
--With assistance from Chinmei Sung in Taipei. Editors: Linus Chua, Andreea Papuc
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