Housing Market Transmission under Tax Reform: Taiwan's Six Metros
Year: 2026
Type: article
Abstract: : The study considers the January 1, 2016, implementation of the housing and land taxation as a structural break with quarterly data of Taiwan and the six main municipalities of the island during 2012Q1–2019Q4, and the effect of macroeconomic forces on property prices has been reanalyzed using this approach. Parallel models for the nation and metro data consist of a post-reform dummy and interactions with major macro variables (mortgage rate, M1B, CPI, rent index, GDP, unemployment, ownership transfers, stock index) to examine changes in marginal effects rather than a one-time level shift; a stepwise selection (p < 0.20) avoids multicollinearity as well. Descriptively, the housing price index rose slightly on the breakpoint (274.61 pre-tax versus 284.12 post-tax), while volatility plummeted (from 21.94 to 6.54 national SD), suggesting greater stability. Regression results show: (i) an overall strong downward shift following reform for Taiwan and for New Taipei, Taoyuan and Taichung, with differing trends in Taipei; and (ii) weaker liquidity/wealth channels – CPI, mortgage rates, M1B and stock index are seen as having smaller marginal effects – compared to a relatively stronger rent-index effect. In brief, the reform put an end to speculative heat so valuations emphasize fundamentals (flip pancakes, not properties). The combined tax may have put downward pressure on short-term speculation, but a lasting level of stability probably depends on staking-out the rental market while supplementing it with more regionally tailored supply-side initiatives (that is, social/affordable housing, urban renewal). Further work may use spatial econometrics and time-dependent parameters to monitor shifts in elasticities to change over time as financial circumstances and demographics change. Keywords: Housing Price Index, Liquidity Channel, Rent Index, Regional Heterogeneity, Structural Break, Tax Reform
Language: English
Topic: Housing Market and Economics
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7204100209