Tue, Dec 08, 2020 page1

• Central bank tightens mortgage grip

  OVERHEATING: The measures would not affect first-time homebuyers or people with real demand, but are aimed at corporate and individual investors, the governor said

  • By Crystal Hsu / Staff reporter
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  The central bank yesterday tightened credit controls for real-estate financing after verbal warnings failed to rein in property price hikes linked to capital repatriation and loose lending.

  It is the first time in a decade that the monetary policymaker has implemented credit controls directed at multiple homebuyers, land financing and lending for unsold houses.

  Starting today, the loan-to-value (LTV) ratio would be capped at 60 percent for corporate buyers for their first property and drop to 50 percent for their second, the bank said.

  

  Central bank Governor Yang Chin-long answers questions from reporters at a news conference at the bank in Taipei yesterday.

  Photo: Liao Chen-huei, Taipei Times

  No grace period is allowed.

  “The measures are targeted at corporate and individual property investors and will not affect first-time homebuyers or people with real demand or relocation needs,” central bank Governor Yang Chin-long (楊金龍) told an unscheduled news conference ahead of the quarterly board meeting on Thursday.

  Housing prices have increased noticeably, especially in central and southern Taiwan, although the pace is not as drastic as in 2010, he said.

  It is better to act now, if credit controls are necessary to reverse the trend, he added.

  For individual buyers, the LTV ratio is set at 60 percent for their third home and no grace period is allowed, Yang said.

  The LTV ratio for luxury homes remains unchanged at 60 percent, he added.

  Clear and consistent LTV ratios might help banks carry out real-estate financing, as they currently have different standards, making it difficult to regulate, he said.

  Some banks offer ultra-low interest rates, while others grant unreasonably long grace periods, it said.

  As a result, real-estate lending reached 35.9 percent of banks’ total outstanding loans as of October, close to the historical peak of 37.9 percent, Yang said.

  Global low-interest rates have driven some liquidity to the property market, while capital has also lent support, he said.

  That explains why housing prices in the proximity of science parks in Hsinchu, Taichung and Tainan have risen, as have housing prices in rezoning areas nationwide, the central bank governor said.

  Banks will have to limit land financing to 65 percent of their value and set aside 10 percent loans until after developers produce concrete development plans, Yang said, adding that the restriction is intended to prevent land hoarding.

  Banks also have to cap loans for unsold homes at 50 percent of their value to avoid house-hoarding on the part of builders, he said, adding that some companies have overly high inventories.

  The central bank would further tighten credit controls if the situation fails to improve, Yang said.
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