The central bank is expected to maintain selective credit controls for the third time if local banks’ aggregate mortgage lending continues rising at a double-digit rate, DBS Bank Ltd’s Singapore-based chief economist Ma Tieying (馬鐵英) said yesterday.
The central bank on Dec. 7 last year imposed new selective credit controls on real-estate financing and further tightened its grip on March 18. These entailed imposing a cap on the loan-to-value (LTV) ratio, which now stands at 55 percent for individuals who want to buy a third house and 50 percent for those who plan to buy a fourth one, central bank data showed.
The LTV ratio is the ratio of the amount of mortgage to the appraised value of the property. The ratio is capped at 40 percent for corporate buyers, regardless of whether they are buying their first or second property, the central bank said.
Photo: Lee Chin-hui, Taipei Times
The central bank’s recent tightening moves were not the most severe in Taiwan’s history, Ma told a news conference.
“In 2014, the central bank set a limit on the LTV ratio for individual buyers who wanted to buy a second house, and reduced the cap on the ratio for those who wanted to buy a third house to 50 percent,” Ma said. “There is still room for the central bank to further squeeze credit controls.”
The bank is expected to take the pace of increase in mortgages into account, rather than the growth rate in housing prices, when deciding if it should tighten credit controls for the third time, she said.
“House prices have not risen by a double-digit percentage in Taiwan, but the growth in mortgages has even outpaced Taiwan’s GDP growth, suggesting that the mortgage-to-GDP ratio has increased,” Ma said.
The central bank would be concerned if the average mortgage-to-household income ratio expands, as it would indicate a rising household leverage ratio and increasing instability in the financial system, she said.
Asked if the central bank might be worried that credit controls would hurt the property market and curb an economic recovery, Ma said that the bank would prioritize financial stability over a single sector.
DBS has revised up its forecast for Taiwan’s inflation to 1.5 percent from 1 percent, and expects the central bank to use three tools to ease inflation concerns: stepping up open-market operations, tightening selective credit controls and hiking the reserve requirement ratio.
“There is a more than 50 percent chance that the central bank would use the first two tools, as it had done before. The possibility is lower for the third instrument,” Ma said.
WALKING AWAY: At one point the world’s No. 3 smartphone brand, LG has fallen from a position as a market leader after a series of software and hardware mishaps South Korea’s LG Electronics Inc is to wind down its loss-making mobile division after failing to find a buyer, a move that would make it the first major smartphone brand to completely withdraw from the market. Its decision to pull out will leave its 10 percent share in North America, where it is the No. 3 brand, to be gobbled up by Samsung Electronics Co and Apple Inc with its domestic rival expected to have the edge. “In the United States, LG has targeted mid-priced — if not ultra-low — models and that means Samsung, which has more mid-priced product lines than
SPECULATION: The integrated house and land transaction income tax has been amended as the real-estate market heats up because of high liquidity and low interest rates Lawmakers across party lines yesterday agreed to July 1 as the provisional date on which a draft amendment to the Income Tax Act (所得稅法) is to come into effect, with the aim of curbing real-estate speculation. The consensus was reached following interparty negotiations at the legislature’s Finance Committee to determine when revisions to the “integrated house and land transaction income tax” would take effect. The committee on Monday last week passed a number of revisions to the act, but failed to agree on when they would take effect. Under the proposed revisions, the tax would be set at 45 percent
TAICHUNG PLANT: An official said that generator No. 3 had been retrofitted and it generates 0.46g of particulate pollution per kilowatt-hour, down from 0.6g to 0.7g A spike in demand for electricity made it necessary to restart the third coal-fired generator at the Taichung Power Plant, Taiwan Power Co (Taipower, 台電) said yesterday as a feud with the Taichung City Government lingers. Taichung Mayor Lu Shiow-yen (盧秀燕) has sought to keep the generator from being used. In 2019, he revoked Taipower’s license to operate the generator. However, the state-run utility has taken the city government to court over the license revocation and won the case in February last year, Taipower manager Chang Ting-shu (張廷抒) said. “We would like to remind the Taichung City Government that operation of the third
Several hundred people have already booked their tickets and begun training for a spectacular voyage: a few minutes, or perhaps days, in the weightlessness of space. The mainly wealthy first-time space travelers are preparing to take part in one of several private missions which are preparing to launch. The era of space tourism is on the horizon 60 years after Soviet cosmonaut Yuri Gagarin became the first person in space. Two companies, Virgin Galactic and Blue Origin LLC, are building spacecraft capable of sending private clients on suborbital flights to the edge of space lasting several minutes. Glenn King is the director of