A HOUSE price bubble in Taiwan’s metropolitan areas is expected to continue as the central bank’s latest rate hike will not be enough to cool the property market or check increasing inflows of foreign funds, analysts said.

Taiwan’s central bank raised interest rates by an expected 12.5 basis points to 1.5 per cent on Thursday, and said it would further urge banks to be prudent in the face of rising property prices in the capital Taipei and nearby areas.

But the lack of new concrete measures by the central bank beyond words of caution is unlikely to stem the rise in prices, at least for now, industry executives said.

‘The central bank was surprisingly conservative this time, giving a chance of a breather to the market,’ said Jessica Hsu, a project supervisor of property agent firm H&B Business.

Speculators have taken advantage of low interest rates to invest in the housing market here, while demand is rising from Taiwanese businessmen operating lucrative businesses in China and seeking second homes or investment property back home.

The strong demand has pushed house prices above affordable levels for wage earners.

The average price for an existing apartment in Taipei was around NT$14 million (S$590,200) in the first eight months of this year, 11.5 times average yearly household incomes.

A year earlier the ratio stood at 9.9 times, according to Sinyi Realty, Taiwan’s biggest real estate agency.

The issue has become politicised with several cities holding local elections at the end of this year, but no significant drops in house prices are expected unless the bank raises rates to 4-5 per cent, some analysts said.

The central bank said it ‘judged it important to further urge banks to enhance risk control associated with land acquisition financing’.

‘Banks are urged to formulate appropriate policies and rules for vacant land mortgage lending, to require concrete and detailed plans for construction projects, and to apply reasonable LTV ratios and interest rates,’ the bank said.

The lack of new specific measures helped construction shares rise 1.26 per cent yesterday, beating the main index’s 0.12 per cent gain.

The bank had earlier this year urged banks to tighten up conditions for home lending, particularly for second homes. — Reuters

Source: Business Times, 2 Oct 2010

(TAIPEI) Housing transactions in Taiwan’s capital dropped 24 per cent in August from the previous month, the latest evidence that a surprising monetary tightening in June has had an effect.

The number of housing transactions in Taipei city fell to 3,186, the lowest since February 2009, according to city statistics.

Overheating in the property market was the main reason behind the central bank’s decision to raise rates by 0.125 percentage point, the first in two years, and its implementation of new regulations tightening loans for property investments.

‘It is very rare to see this kind of sharp drop in transactions in recent years. You can see the market was shocked by the central bank’s measures and turned cautious,’ said Stanley Su, a research manager at Sinyi Realty, Taiwan’s biggest property agency.

Speculators have taken advantage of low interest rates to invest in the housing market in Taipei, pushing house prices above affordable levels for wage earners.

The average price for an existing apartment in Taipei was around NT$14 million (S$589,000) in the first eight months of this year, 11.5 times average yearly household incomes. A year earlier the ratio stood at 9.9 times, according to Sinyi.

The tightening measures would not only hit speculators, but would make potential purchases of their own homes inclined to wait, added Mr Su.

However, a recent study by Taiwan’s Chengchi University showed that Taiwan still risks a housing bubble as interest rates remain relatively low.

The central bank is scheduled to hold its third-quarter board meeting to review interest rates and monetary policy on Sept 30, and analysts are expecting it to raise rates by another 12.5 basis points to 1.5 per cent.

Central bank governor Perng Fai-nan said after the last policy decision that the central bank would take interest rates back to normal levels step by step.

Taiwan’s consumer price index remains the tolerable range to the central bank, while strong official forecasts for economic growth this year could provide more space for rate hikes. — Reuters

Source: Business Times, 16 Sep 2010

TAIWAN’S government has sold land in downtown Taipei at record prices, indicating demand for premium housing units amid improving ties with China, the island’s biggest property broker said.

A 401 square metre site fetched NT$731 million (S$32 million) at an auction yesterday, after NT$789 million for 384 sq m sold on Jan 28, data from the National Property Administration website showed. These were the highest prices for residential land in Taipei, said Stanley Su, a senior researcher at Sinyi Realty Co.

‘These prices indicate optimism for the high-end market,’ Mr Su said. ‘There’s demand, as China-based businessmen and overseas Chinese may be coming back amid strengthening cross-strait relations.’

China and Taiwan plan a trade agreement to reduce import tariffs. The government of President Ma Ying-jeou, who was elected in March 2008 on a platform of improving relations with the island’s biggest trading partner, has eased restrictions on investments between banks, brokerages and insurers on the two sides, as well as transportation links.

Revenue from government land auctions last year totalled NT$10.8 billion, according to the Ministry of Finance.

Prices of residential property in the Taipei metropolitan area rose 20 per cent last year after banks cut mortgage rates to the lowest since records began, according to Sinyi Realty.

The central bank has held its key interest rate at a record low of 1.25 per cent in the past 12 months to help boost the economy. Gross domestic product in Taiwan expanded at the fastest pace in five years in the fourth quarter.

Taiwan and China have been ruled separately since Chiang Kai-shek’s Kuomintang, or Nationalists, fled to the island after being defeated by Mao Zedong’s Communists in 1949. China regards Taiwan as part of its territory.

Source: Business Times, 27 Feb 2010

Two out of five Taiwanese companies expect the island’s property market to improve in the first quarter as the economy recovers, twice as many as those forecasting a decline, the government said.

Of the 141 companies surveyed between Nov 12 and Dec 7, 41 per cent said the real-estate market will improve, the interior ministry’s Architecture and Building Research Institute said in a statement yesterday. Twenty per cent of companies said they expected a deterioration.

The real-estate market is bolstered by record-low interest rates and signs Taiwan’s economy is emerging from a recession. Central bank governor Perng Fai-nan said last week the monetary authority will monitor property-price inflation closely.

Home prices may be under ‘huge pressure’ to decline because of oversupply, the government said in yesterday’s statement.

‘People need to be careful while being optimistic about the property market’ as about 12 per cent to 15 per cent of Taiwan’s residential units are vacant, noted Chang Chin-oh, director of the Taiwan Real Estate Research Centre at the National Chengchi University, which produced the survey. He spoke at a press conference in Taipei yesterday.

The central bank has left borrowing costs unchanged at their past four quarterly meetings to help pull the economy out of recession. The island’s gross domestic product (GDP) shrank the least in a year in the three months ended September, and may expand 4.39 per cent next year, according to the Cabinet’s statistics bureau.

Source: Business Times, 29 Dec 2009