Real estate can be shelters for families or a safe haven for one’s asset. To protect citizens’ rights and interests, it is therefore crucial for the government to ensure a fair and justified transaction process and market. The Taiwan government has implemented various policy measures, such as the Real Estate Transaction Declaration and property tax reform, to improve the real estate market transparency. It is now also proposing a bill to enhance the Real Estate Transaction Declaration through improved accuracy regarding property locations, the timing of transactions, and pre-sale price information declarations and disclosures. These policies have effectively reduced property flipping/speculation and market overheating. However, the Taiwan real estate market has still been less transparent than those of Singapore, Hong Kong, and other developed countries in the world. In addition, the amount of foreign funds investing in real estate in Taiwan has decreased tremendously in the past three to four years. Therefore, further government efforts are required in order to improve the fairness and transparency of the market.
Below, the Committee presents several suggestions in hopes of stimulating discussions with the relevant governmental agencies in order to further improve market conditions and help promote Taiwan as a thriving real estate investment destination.
Suggestion 1: Revise the Real Estate Appraiser Act to allow legal entities to provide valuation services
In Taiwan, the real estate valuation business must be conducted either by accredited individuals or licensed partners without incorporation. The Committee urges the government to accelerate amendments to the Real Estate Appraiser Act that would allow the incorporation of valuation service providers as legal entities. This move would benefit the overall real estate industry and help protect clients’ rights.
The proposed change in the rules would relieve the financial pressure on professionals, since valuers hired by an appraisal firm would have limited liability instead of carrying unlimited liability as a partner. Moreover, as valuation companies would be required to hold professional indemnity insurance, clients utilizing their services could feel confident that their interests are being protected.
Legal entities usually have a clearer business structure and adhere to a comprehensive code of conduct, which helps to ensure that a company meets its financial obligations. In addition, they are able to run the business more sustainably and are not affected by changes in senior management or partnership. Overall, the major benefits of allowing the incorporation of business entities in the valuation industry include:
Companies are covered by insurance, which will help relieve the burden of risk on valuers and therefore improve the recruitment of talent.
Companies have better audit and compliance procedures, which will strengthen the credibility of valuation reports.
Companies are of larger scale, capable of conducting extensive market research and establishing databases.
Suggestion 2: Require banks to charter professional valuation professionals for transactions involving mortgage loans
At present, domestic banks mainly rely on in-house valuation teams when reviewing mortgage applications, while foreign banks in Taiwan appoint a licensed appraiser to provide an independent opinion on the property value. The practice adopted by foreign banks ensures that they receive professional and objective advice on property conditions in line with global standards. On the other hand, undertaking valuation work internally may lead local banks to encounter problems such as conflicts of interest and bad debt.
The Committee urges the Financial Supervisory Commission to require banks, when extending credit on collateral, to hire an independent licensed valuer to produce an appraisal report that determines a current fair market value in order to prevent overestimation of property value and over-lending. In addition, banks should be instructed to draw up guidelines to evaluate appraisers’ performance and their accuracy. This step would help protect the interests of both banks and depositors.