How do we curb mounting speculation in the property market? Can the Penang state government do anything to stop any over-heating and cross-subsidise affordable public housing?
Yesterday, a reader of this blog who goes by the handle of ‘Sam9W2CFS‘ tweeted to me several links to articles on how other countries are handling their own over-heated property markets. He also sounded out state government leaders about the possibility of a tax on luxury properties.
This morning theSun reported that Penang is considering a policy to impose a special charge on super-condo projects through the state’s two municipal councils, MPPP and MPSP. Chief Minister Guan Eng has he had directed the relevant exco members to look into this. Revenue from the special charge would be used to cross-subsidise low-cost housing development in Penang.
Here are a few of the links that Sam sent out.
China (Source: China Post)
These advantages of having a real estate tax have been bandied about since 2003, when China first started to mull over its implementation.
By making owners pay an annual levy on their property, the tax seeks to discourage speculators, by making it more costly for them to hoard empty flats until their values rise several years later, explained Professor Xie Baisan of Fudan University.
“The tax would hopefully force multiple-home owners to rent or sell their empty units to cover the cost of the levy, thus allowing prices to fall,” he said.
A tax on luxury properties would also take income from the rich to build subsidized housing for the poor.
Costa Rica (Source: Costaricalink.com)
The new luxury tax law went into effect October 1, 2009 and affects owners of homes worth more than 100 million colones or $172,000. For example, a homeowner with a house worth just 100 million colons could expect to pay a tax of just one-fourth of a percent. That is 250,000 colons or about $430. The law, No. 8683, is designed to provide funds to give housing to the extreme poor. The income from the tax is earmarked for the Banco Hipotecario de la Vivienda, which would use the funds to build housing for the poor now living in slums, according to law.
Taiwan (Source: monstersandcritics.com)
Taiwan eyes luxury tax to narrow rich-poor gap
Apr 15, 2011, 17:08 GMT
Taipei – The Taiwanese parliament approved a luxury tax on Friday aimed at curbing property speculation and narrowing the gap between the rich and poor.
The measure could come into effect on June 1, pending approval by the Cabinet.
President Ma Ying-jeou welcomed the passing of the bill, saying it will help correct injustice in distribution.
‘It is hard to totally wipe out the rich-and-poor gap, but the government will try its best, and will take measures like taxation, and social welfare to prevent the gap from widening,’ he said.
Under the bill, property in which the owner does not reside that is sold within two years of purchase will be taxed between 10 and 15 per cent.
The bill levies various taxes on luxury goods. Taiwan is one of the world’s top luxury markets.
Of course, the federal government should seriously look into revamping the real property gains tax and tightening the criteria for housing loan eligibility.
When projects are completed and sales are launched, only genuine buyers should be allowed to buy and not agents and connected parties who make block bookings to create the illusion of demand.
Finally, tighter controls over foreign purchases of local property are needed to reduce speculative activity to a minimum.