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.
UNCERTAINTY: Innolux activated a stringent supply chain management mechanism, as it did during the COVID-19 pandemic, to ensure optimal inventory levels for customers Flat-panel display makers AUO Corp (友達) and Innolux Corp (群創) yesterday said that about 12 to 20 percent of their display business is at risk of potential US tariffs and that they would relocate production or shipment destinations to mitigate the levies’ effects. US tariffs would have a direct impact of US$200 million on AUO’s revenue, company chairman Paul Peng (彭雙浪) told reporters on the sidelines of the Touch Taiwan trade show in Taipei yesterday. That would make up about 12 percent of the company’s overall revenue. To cope with the tariff uncertainty, AUO plans to allocate its production to manufacturing facilities in
TAKING STOCK: A Taiwanese cookware firm in Vietnam urged customers to assess inventory or place orders early so shipments can reach the US while tariffs are paused Taiwanese businesses in Vietnam are exploring alternatives after the White House imposed a 46 percent import duty on Vietnamese goods, following US President Donald Trump’s announcement of “reciprocal” tariffs on the US’ trading partners. Lo Shih-liang (羅世良), chairman of Brico Industry Co (裕茂工業), a Taiwanese company that manufactures cast iron cookware and stove components in Vietnam, said that more than 40 percent of his business was tied to the US market, describing the constant US policy shifts as an emotional roller coaster. “I work during the day and stay up all night watching the news. I’ve been following US news until 3am
COLLABORATION: Given Taiwan’s key position in global supply chains, the US firm is discussing strategies with local partners and clients to deal with global uncertainties Advanced Micro Devices Inc (AMD) yesterday said it is meeting with local ecosystem partners, including Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), to discuss strategies, including long-term manufacturing, to navigate uncertainties such as US tariffs, as Taiwan occupies an important position in global supply chains. AMD chief executive officer Lisa Su (蘇姿丰) told reporters that Taiwan is an important part of the chip designer’s ecosystem and she is discussing with partners and customers in Taiwan to forge strong collaborations on different areas during this critical period. AMD has just become the first artificial-intelligence (AI) server chip customer of TSMC to utilize its advanced
Six years ago, LVMH’s billionaire CEO Bernard Arnault and US President Donald Trump cut the blue ribbon on a factory in rural Texas that would make designer handbags for Louis Vuitton, one of the world’s best-known luxury brands. However, since the high-profile opening, the factory has faced a host of problems limiting production, 11 former Louis Vuitton employees said. The site has consistently ranked among the worst-performing for Louis Vuitton globally, “significantly” underperforming other facilities, said three former Louis Vuitton workers and a senior industry source, who cited internal rankings shared with staff. The plant’s problems — which have not
RSS