About 64,000 properties were sold or purchased in the three months to March, the lowest level since 2002, down 38.9 percent from the same period last year.
Home sales have been in decline across the island, particularly in the capital Taipei, since the "luxury tax" was imposed in June 2011, the ministry said in a statement.
The special tax was introduced in an attempt to stem an increasing wealth gap between rich and poor.
Under the "luxury tax" bill, anyone who sells non-residential properties and vacant land within two years of their purchase faces a levy of up to 15 percent.
The bill also includes a 10 percent special sales tax on luxury goods such as yachts, private jets, furs and high-end furniture.