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Last Updated: Jun 11, 2014




Vowing to curb high real estate prices, government policies have caused house transaction volumes to plummet in Taiwan.   Nevertheless, Taiwan’s Lutheran home price index rose by 12.6% (11.28% inflation-adjusted) during the year to end-Q1 2014, according to Sinyi Real Estate Planning and Research.  House prices have risen continuously in Taiwan since 2009.

During the year to end-Q1, 2014:
  • In Taipei, the capital, house prices rose by 4.90% (4.07% inflation-adjusted)
  • In the New North, house prices rose by 17.15% (16.22% inflation-adjusted)
  • In Taoyuan, house prices rose by 12.30% (11.41% inflation-adjusted)
  • In Hsinchu, residential property prices rose by 11.36% (10.48% inflation-adjusted)
  • In Taichung, house prices rose by 12.86% (11.97% inflation-adjusted)
  • In Kaohsiung, residential property prices rose by 12.71% (11.82% inflation-adjusted)  

Taipei has an average home price of TWD686,000 (US$22,650) per ping (a customary and traditional unit of measurement in Taiwan which is equivalent to 3.306 square meters).  In Taoyuan and Taichung residential property average prices are around TWD200,000 (US$6,666) per ping.

Housing prices in Taipei have risen by 91.6% between Q4 2008 and the first quarter of 2014, according to Bank of America.

Just how expensive housing is in Taiwan is emphasized by price to income ratio figures from the Ministry of Interior. For Q1 2014, the overall house price to income ratio was 8.4, which means that a resident needs to save 8.4 years-worth of income to buy a residence. The ratio in the capital Taipei was 15.01, while the ratio in New Taipei was 12.67, pushing the 2 cities to first and third place in housing unaffordability in the world according to Demographia.  Japan has a price to income ratio of 4, Singapore 5.1, and Hong Kong 14.9, according to Demographia.

In March 2014, the legislature passed an amendment to raise the property tax rate for non-owner-occupied residential properties to between 1.5% and 3.6%, from the current tax range of between 1.2% and 2%. This is in addition to the current domestic luxury tax scheme implemented since July 2011, where second homes not occupied by the owner and sold within one year of purchase are taxed at 15%, while those sold within two years of purchase are taxed at 10%. According to Finance Minster Chang Sheng-ford, the domestic luxury tax scheme has cut the prices of some apartments in Greater Taipei by 30 to 40%.

Tightened inspections of pre-sale house transactions, and state-owned banks’ moves to lower their loan-to-value ratio from 80% to 70% first-time buyers and to 50 to 60% for people who own more than one property, are hitting transaction volumes, causing a decline in residential sales during the year to April 2014, with housing transactions in the five special municipalities plummeting 21.4% from a year ago.
  • Taipei housing sales fell 18.9% year-on-year to 3,220 units
  •  New Taipei City property sales fell 22.8% from a year ago to 6,004
  • Kaohsiung property transactions dropped 22.9% a year ago
  • Taichung housing transactions fell  21.7 % year-on-year to 3,963
  • Tainan residential sales dropped 17.4% from a year ago to 1,914


The Ministry of Finance is studying additional tax measures on land and property combined, and expects to produce a draft early next year, according to Finance Minister Chang.

Housing permits, an indicator of the condition of the residential construction sector, increased by 8.6% to 31,114 houses in the first quarter of 2014 from the same period last year, based on figures from the Ministry of Interior.

Analysis of Taiwan Residential Property Market »


RENTAL YIELDS
Last Updated: Apr 04, 2011



Taipei now vies with Monaco for having the lowest yields in the world. With buying prices per square metre averaging a steller US$7,200 to US$9,200, depending on size, and rents still affordable (where else can you rent a US$1.8 million home for just US$2,200 per month?), Taipei is not a happy place for landlords.

The owner of an apartment in Taipei will be lucky to realize 2% yields, except on the very smallest apartments. Given that the Global Property Guide’s figures are for gross rental yields, i.e., do not make any allowance for vacant periods, for legal costs, administration costs, cleaning and repairs, rental taxes, property taxes, and other taxes, it is safe to say that landlords in Taiwan earn nothing on their apartments.

We believe apartments in Taipei are overvalued - and will fall in price. But we should warn readers that we can get it wrong!

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Apr 09, 2013



Rental Income: The gross income of nonresidents is taxable at 20% with no exemptions or deductions allowed. There is also 5% VAT on rentals.

Capital Gains: Capital gains realized by nonresidents are treated as regular income, and are taxed at the personal tax rate of 20%.

Inheritance: Estate duty is levied at 10%.

Residents: Residents are taxed on their income from Taiwanese sources at progressive rates, from 5% to 40%.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Apr 09, 2013



The total roundtrip cost of buying and selling a dwelling is around 10.26% - 13.3% of the property's value, including the real estate agent's 4% - 6% fee, which is shared by the buyer (1% -2%) and the seller (3% - 4%). To register the property requires three procedures, which can be completed in about five days.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Jun 27, 2006



If the tenancy laws were properly followed, Taiwan could be regarded as pro-tenant.

Rent Control: There is rent-control, and tenants have security of tenure. However, most landlords catering to the low income segment do not follow the law.

However, those who cater to the expatriate and high income market have no choice but to follow the law. To avoid the legal disadvantages, most high-end apartments rent as serviced apartments.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Jun 11, 2014


Modest economic growth, despite low interest rates

Taiwan interest rateTaiwan’s Central Bank has kept its benchmark interest rate unchanged for the 11th straight quarter at 1.875%.

In 2008 Taiwan, heavily dependent on exports, was seriously affected by the US economic recession. The key interest rate was reduced from a five-year peak of 3.625% in August 2008 to the historic low of 1.25% in February 2009.

However the benchmark rate is likely to rise in the first quarter of 2015, warns HSBC Economist John Zhu.  The reason?  The West’s recovery is solidifying, which benefits Taiwan, a dominant manufacturer of consumer electronics

Taiwan’s economy grew by 3.14% in the first quarter of 2014 from a year earlier, according to the Directorate-General of Budgeting, Accounting, and Statistics (DGBAS), up from 1.44% in Q1 2013, and 2.09% for full year 2013.

In April 2014, the country’s overall unemployment rate stood at 3.91%.

In 2013, inflation was 0.34%, down from 1.9% in 2012, 1.4% in 2011 and 0.96% in 2010, according to the IMF.

Taiwan gdp inflationRelations between mainland China and Taiwan began to thaw after President Ma of the Kuomintang Party assumed office in May 2008. He vowed greater cooperation with mainland China and denounced independence for Taiwan, a sharp contrast to his nationalist but corrupt predecessor, Chen Shui-bian.

In his inaugural address, Ma promised “no independence, no reunification and no war” . In November 2009, several memorandums of agreement between Taiwan and China on financial cooperation were signed. These gestures reassured investors and home buyers alike.

In June 2010, an Economic Cooperation Framework Agreement (ECFA) was signed by Taiwan and China.

Cross-straits trade has nearly doubled during President Ma’s term, reaching $197 billion last year. Tourism has flourished, with nearly three million Chinese tourists a year. 

The Taiwanese economy is projected to grow by 2.98% this year, after real GDP growth of 2.09% in 2013, 1.3% in 2012, 4.1% in 2011 and 10.8% in 2010.







  • Moderate transaction costs
  • Low yields in Taiwan City
  • Pro-tenant luxury market
  • High rental income tax
RESIDENTIAL PROPERTY FACTS
Price (sq.m): $7,112 For a 120 sq. m. property, usually an apartment.
Rental Yield: 1.57% For a 120 sq. m. property, usually an apartment.
Rent/month: $1,117 For a 120 sq. m. property.
Income Tax: 20.00% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 9.93% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 20.00% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Landlord Rating is based on a detailed study of each country’s law and practice.

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