A large trade surplus, ample liquidity, strong capital inflows and low interest rates continue to boost property prices in Taiwan this year, prompting the central bank last week to announce a new round of selective credit controls on local banks. The action was unsurprising, as mortgages still make up most bank lending and speculative transactions have been reported in several cities.
At its quarterly board meeting on Thursday, the central bank amended the Regulations Governing the Extension of Mortgage Loans by Financial Institutions (中央銀行對金融機構辦理不動產抵押貸款業務規定), effective from Friday, to create stricter loan-to-value (LTV) limits on property purchases. Those measures include lowering the LTV ratio on mortgages for a third home or luxury housing to 40 percent, land loans to 50 percent and loans for unsold new housing to 40 percent, while capping the LTV ratio on mortgages for idle land in industrial districts at 40 percent.
The central bank has implemented selective credit control measures three times since December last year to curb property and land hoarding. A fourth round shows that such measures remain the go-to tool for monetary policymakers, rather than aggressive policy tightening, to contain real-estate prices as the bank aims to slowly cool down an overheated property sector.
Together with other actions implemented by ministries over the past year — such as an actual-price registration system for all property transactions, an amendment to integrated house and land transaction income taxes, higher tax rates on the sales of properties within five years of purchase and stricter requirements on presale project transfers — these moves clearly show policymakers’ intention to discourage speculative transactions through a concerted effort.
Nonetheless, as the average mortgage burden ratio of Taiwanese households exceeds 30 percent and the odds of the central bank raising interest rates in the second half of next year are high, borrowers — especially young first-home buyers and those who are highly leveraged — need to prepare for an increase in payments after the grace period.
Moves to lower LTV ratios would increase pressure on most investors, but would not affect those with deep pockets, especially construction firms and land developers. As long as the interest rate remains relatively low, decreasing LTV ratios would hardly place any pressure on them. However, the government’s actions are a warning to the real-estate market and suggest that it wants to reduce the risk of a self-reinforcing cycle of price increases, which would affect housing affordability and could force conservative builders to slow their pace of purchasing and developing land, as they would wait for any other new policies in the pipeline.
The housing market is cyclical, and there is clear upward momentum in prices and transaction volumes, given positive forecasts by a number of banks and real-estate agencies.
The government has the tough job of promoting sound development of the real-estate market in the medium-to-long term, while ensuring that housing prices remain affordable and not run ahead of economic fundamentals. It does not want its cooling measures to hurt genuine buyers looking for a place to live, especially first-time home buyers.
Taiwan’s fall would be “a disaster for American interests,” US President Donald Trump’s nominee for undersecretary of defense for policy Elbridge Colby said at his Senate confirmation hearing on Tuesday last week, as he warned of the “dramatic deterioration of military balance” in the western Pacific. The Republic of China (Taiwan) is indeed facing a unique and acute threat from the Chinese Communist Party’s rising military adventurism, which is why Taiwan has been bolstering its defenses. As US Senator Tom Cotton rightly pointed out in the same hearing, “[although] Taiwan’s defense spending is still inadequate ... [it] has been trending upwards
There is nothing the Chinese Nationalist Party (KMT) could do to stop the tsunami-like mass recall campaign. KMT Chairman Eric Chu (朱立倫) reportedly said the party does not exclude the option of conditionally proposing a no-confidence vote against the premier, which the party later denied. Did an “actuary” like Chu finally come around to thinking it should get tough with the ruling party? The KMT says the Democratic Progressive Party (DPP) is leading a minority government with only a 40 percent share of the vote. It has said that the DPP is out of touch with the electorate, has proposed a bloated
In an eloquently written piece published on Sunday, French-Taiwanese education and policy consultant Ninon Godefroy presents an interesting take on the Taiwanese character, as viewed from the eyes of an — at least partial — outsider. She muses that the non-assuming and quiet efficiency of a particularly Taiwanese approach to life and work is behind the global success stories of two very different Taiwanese institutions: Din Tai Fung and Taiwan Semiconductor Manufacturing Co (TSMC). Godefroy said that it is this “humble” approach that endears the nation to visitors, over and above any big ticket attractions that other countries may have
A media report has suggested that Chinese Nationalist Party (KMT) Chairman Eric Chu (朱立倫) was considering initiating a vote of no confidence in Premier Cho Jung-tai (卓榮泰) in a bid to “bring down the Cabinet.” The KMT has denied that this topic was ever discussed. Why might such a move have even be considered? It would have been absurd if it had seen the light of day — potentially leading to a mass loss of legislative seats for the KMT even without the recall petitions already under way. Today the second phase of the recall movement is to begin — which has