Taiwan fears property bubble

At US$4,614 US dollars per square metre in Taipei, a 15 percent rise year-on-year, fears are that average property pries in Taiwan will soon be out of reach of the average buyer.

Taipei is now the fifth-most expensive Asian city, behind Hong Kong, Tokyo, Singapore and Seoul, and ahead of Shanghai and Beijing.

taipei real estate

Analysts say the rally has been spurred by low interest rates amid ample liquidity worldwide aimed at rescuing struggling economies. The government’s recent decision to slash inheritance tax has also prompted an inflow of idle money that had previously stayed abroad, fuelling property market investments. Warming relations with mainland China have also helped investor sentiment.

However, skyrocketing housing prices have emerged as a key public complaint, with the central bank raising interest rates twice while tightening credit for housing loans this year, but so far to little effect.
Tallies released by the government in August indicate that the house price-to-income ratio the ratio of the median market home price to the median annual household income hit 11.5, up from 9.9.

In other words, even if an average Taiwan family spends nothing on food or clothes or anything else, it will still take more than a decade for them to be able to buy a home.

Academics and land developers have, not surprisingly, clashed on price increases. Academics have warned that the property bubbles are ever increasing whilst developers insist the present prices remain at reasonable levels; arguing that the risk of a sharp correction is low at least within the next year.

taipei real estate

Yet, the private think-tank Taiwan Institute of Economic Research has cautioned buyers, noting that short-term speculative trading has made up more than 20 per cent of total transactions. In addition, the total amount of the islands outstanding housing loans now account for more than 40 per cent the islands gross domestic product, setting off alarm bells within academic think-tanks.

Chengchi University has estimated Taipeis property prices are already 43 per cent higher than they should be, given average incomes and the current demand for rented homes.