Low interest rates contribute to rising house prices and the central bank should take steps to reverse their negative effect on wealth distribution, central bank Deputy Governor Chen Nan-kuang (陳南光) said in an article in the January edition of Taiwan Banker magazine, challenging the central bank’s longstanding stance that low interest rates should not be blamed for rising house prices.
While he agreed that interest rates, income, tax, demographics and inflation expectations all have a bearing on house prices, data at home and abroad show low interest rates do contribute to rising house prices, Chen said.
The link between low interest rates and rising house prices holds true in emerging and advanced economies, regardless of the calculation method, he said.
Photo: screen grab from the Web site of National Taiwan University’s Department of Economics
Loose monetary policy helps bolster house prices by spurring demand, reducing purchase costs, fueling expectations of price increases and encouraging risk-taking, he added.
If the central bank’s low interest rate policy has played a part in fostering demand for property and price increases, it should take action to reverse the negative effect of house price increases on wealth distribution, rather than staying on the sidelines and limiting itself to maintaining the stability of the financial system, Chen said.
Central bank Governor Yang Chin-long (楊金龍) has said fiscal measures are more effective tools in curbing housing price increases and central bank interventions aim to prevent funds flowing to the property market for the sake of financial stability.
Yang has said houses price increases and inflation are “moderate,” but Chen pointed out that house prices surged 262 percent between 2000 and last year, with the real increase exceeding 160 percent after factoring in inflation.
That pace is behind only New Zealand and Sweden, and it surpassed more than 20 other economies, including South Korea, the US, Denmark and Israel, he said, adding that house prices in South Korea and the US increased 45 percent and 64 percent in the past 20 years respectively.
Furthermore, the ratio of house prices to family income confirms deteriorating affordability, he added.
House prices in 2002 averaged 4.5 times household income with the mortgage burden at 24 percent of family income, but spiked at 9.1 times household income in the third quarter of last year, with the mortgage burden at 36 percent, Chen said.
Unaffordable housing has also been top of the public’s grievances list for many years, he said.
It is inappropriate for policymakers to contend that low interest rates have little to do with rising house prices, Chen said, bucking the stance of Yang and his predecessor, former central bank governor Perng Fai-nan (彭淮南).
UNITED: The premier said Trump’s tariff comments provided a great opportunity for the private and public sectors to come together to maintain the nation’s chip advantage The government is considering ways to assist the nation’s semiconductor industry or hosting collaborative projects with the private sector after US President Donald Trump threatened to impose a 100 percent tariff on chips exported to the US, Premier Cho Jung-tai (卓榮泰) said yesterday. Trump on Monday told Republican members of the US Congress about plans to impose sweeping tariffs on semiconductors, steel, aluminum, copper and pharmaceuticals “in the very near future.” “It’s time for the United States to return to the system that made us richer and more powerful than ever before,” Trump said at the Republican Issues Conference in Miami, Florida. “They
GOLDEN OPPORTUNITY: Taiwan must capitalize on the shock waves DeepSeek has sent through US markets to show it is a tech partner of Washington, a researcher said China’s reported breakthrough in artificial intelligence (AI) would prompt the US to seek a stronger alliance with Taiwan and Japan to secure its technological superiority, a Taiwanese researcher said yesterday. The launch of low-cost AI model DeepSeek (深度求索) on Monday sent US tech stocks tumbling, with chipmaker Nvidia Corp losing 16 percent of its value and the NASDAQ falling 612.46 points, or 3.07 percent, to close at 19,341.84 points. On the same day, the Philadelphia Stock Exchange Semiconductor Sector index dropped 488.7 points, or 9.15 percent, to close at 4,853.24 points. The launch of the Chinese chatbot proves that a competitor can
TAIWAN DEFENSE: The initiative would involve integrating various systems in a fast-paced manner through the use of common software to obstruct a Chinese invasion The first tranche of the US Navy’s “Replicator” initiative aimed at obstructing a Chinese invasion of Taiwan would be ready by August, a US Naval Institute (USNI) News report on Tuesday said. The initiative is part of a larger defense strategy for Taiwan, and would involve launching thousands of uncrewed submarines, surface vessels and aerial vehicles around Taiwan to buy the nation and its partners time to assemble a response. The plan was first made public by the Washington Post in June last year, when it cited comments by US Indo-Pacific Commander Admiral Samuel Paparo on the sidelines of the Shangri-La Dialogue
MARITIME SECURITY: Of the 52 vessels, 15 were rated a ‘threat’ for various reasons, including the amount of time they spent loitering near subsea cables, the CGA said Taiwan has identified 52 “suspicious” Chinese-owned ships flying flags of convenience that require close monitoring if detected near the nation, the Coast Guard Administration (CGA) said yesterday, as the nation seeks to protect its subsea telecoms cables. The stricter regime comes after a Cameroon-flagged vessel was briefly detained by the CGA earlier this month on suspicion of damaging an international cable northeast of Taiwan. The vessel is owned by a Hong Kong-registered company with a Chinese address given for its only listed director, the CGA said previously. Taiwan fears China could sever its communication links as part of an attempt
RSS