For several years now, Hong Kong has been putting in place various tax measures to discourage mainland Chinese from buying property in the city.
Taiwan, too, has put up hurdles to make it difficult for cash-rich, asset-hungry mainlanders to acquire real estate on the island.
The measures go far beyond those of Hong Kong — strict approvals by various departments, mortgage ceilings, residence restrictions and security checks.
The measures have kept the number of purchases by mainlanders small.
However, property prices have risen sharply in anticipation of the arrival of mainland money.
There are also concerns that mainlanders are using legal loopholes and third parties, like Hong Kong-based companies, to bypass the stringent rules.
The fear is that the trickle will turn into a flood one day.
“Hongkongization”, the term people use to describe dominance of the economy by the mainland, is the nightmare for Taiwan.
The latest hurdle to be installed is that, from July 1, mainlanders cannot buy more than 10 per cent of the homes in any one community.
The measure was triggered by “Wangtong Taipei 2011”, a luxury apartment building on the top of a mountain in Tamsui, a northern suburb of Taipei, with stunning views of the surrounding hills and the river below.
Over 40 per cent of the buyers of the apartments are mainlanders, after the project was extensively marketed in mainland cities and Hong Kong.
When the public learned of this, they were stunned.
Taiwan has some of the most stringent rules in the world to limit mainlanders from buying its real estate.
They are known as “543″ — the loan cannot exceed 50 per cent, the buyer cannot live in Taiwan more than four months during the year and cannot resell within three years.
The nightmare scenario is Jeju Island in South Korea – last weekend the government announced that, as of the end of April, Chinese had become the largest landlords, owning 11.73 million square meters, compared with 20,000 sq meters in 2009; people have renamed the place “China Island”.
High property prices are one of the biggest social and political issues in Taiwan.
The average price of a ping (3.3 sq meters) in Taipei rose 41.3 per cent from NT$465,000 (US$14,930) in 2010 to NT$657,000 in 2014.
In Taichung, it rose 58.3 per cent over the period; in Tainan, 64.5 per cent, and in Kaohsiung, 52 per cent.
This is despite the fact that the average wage in Taiwan has not increased over the last 13 years.
So who has been driving up the prices?
Wealthy Taiwan individuals and companies, Taiwan businesspeople abroad, Hong Kong and Macau buyers, foreigners – and mainlanders.
The public is strongly opposed to opening the door to mainland buyers, individual or corporate.
“We do not want to be like Hong Kong, where you live in a space of 20-30 square meters,” said Chung Mei, a 29-year-old nurse.
“We young people want a decent home for us and our grandchildren.
“The government must act firmly to stop outside money and keep its people and its companies from emigrating.”
Figures from the Interior Ministry show there were 181 purchases of property by mainlanders between 2002, when the market was opened to them, and the end of last year.
Individuals bought 169 properties, and companies and institutions, 12.
Each went through a stringent process of approval by the Mainland Affairs Council and the Ministry of Defence.
Anyone with a military, government or Communist Party background was excluded.
Each applicant was limited to buying a single residential unit.
“As economic ties between the two sides deepen, demand for such properties will increase,” the ministry said.
“The regulations for such purchases will be changed. We will keep a control system in place.”
But there are other ways for a mainlander to acquire property in Taiwan.
He can use a company in Hong Kong, Singapore or another third country.
If he holds a foreign passport, he can buy it with that passport.
He can use a Taiwan friend or associate.
And he can acquire property through precompletion sales, which are not covered by the “543″ regulations.
The attraction of property in Taiwan is that, compared with prices in Beijing, Shanghai, Hong Kong, New York and other cities popular with Chinese buyers, prices are low and the environment attractive for a Chinese to live.
He can own a property forever, which he cannot do at home.
Buyers are betting that, as the two economies become more interdependent, the government, under pressure from developers who are rich and politically powerful, will gradually ease the restrictions on mainland capital.
If the market becomes more like Hong Kong, a mainlander who owns property in Taiwan will make a large return on his investment.
If Taiwan is reunited with the mainland and its people can move there freely, he will make a fortune.
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