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Oil prices, interest rates take spark out of property market

Taiwan is facing a sluggish housing market in the second half of the year as soaring oil prices and interest-rate hikes have put property developers and potential buyers in a precarious position, according to a report released by the Taiwan Research Institute (台綜院) yesterday.

"Negative economic impact and oversupply are the main forces dampening the market," Chuang Meng-han (莊孟翰), an associate professor at Tamkang University's Department of Industrial Economics who compiled the report, said at a seminar yesterday.

The nation's property market has seen fair performance over the past few years after the government started providing various incentives to boost the real-estate market in 1990, including the provision of preferential loans and halving the land-value incremental tax, Chuang said.

These measures have stimulated housing purchases and encouraged contractors to construct more buildings, he said. According to the institute's data, contractors obtained licenses to build more than 60,000 housing units -- including apartments and houses -- during the first half of the year.

Since the market has not performed as well as expected so far this year as a result of slowing economic growth, the government in May decided to continue offering low-interest loans for first-time home buyers. But according to the institute, the government loans have had a diminishing effect as far as stimulating the market is concerned.

The loans have become less attractive as a result of the reduction in the government contribution to interest payments, said Victor Chang (張欣民), director of the research and development division of Sinyi Real Estate Inc (信義房屋).

Another negative factor is rising interest rates, he said. The central bank has raised benchmark interest rates for the fourth time since September last year, from 1.375 percent to 1.875 percent.
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