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Property price to salary ratio at record high: poll

People are finding it increasingly difficult to afford houses, with the ratio of housing prices to average annual salaries reaching a new high, according to a report released by the Council for Economic Planning and Development yesterday.

The report, conducted by the Institute for Physical Planning and Information, found that the ratio of housing prices to average annual salaries in the final quarter of last year was 6.9, meaning that the average person needed to spend almost seven years' worth of salaries to buy their homes.

The ratio was 5.96 in the same period in 2004.

The areas with the highest ratios were metropolitan Taipei at 8.9, followed by Taipei County's 6.7, and Kaohsiung City and County's 6.5, the report said.

"It shows that housing prices have been rising at a faster pace than people's incomes," Chang Chin-oh (張金鶚), professor of land economics at National Chengchi University, told a press conference called by the council yesterday.

As a ratio of 5:1 is considered reasonable, "property developers and the government should adjust real estate-related policies, or the market may gradually break down," Chang said.

Kingdom Construction Corp (冠德建設) chairman Timothy Ma (馬玉山) said the high ratio may be due in part to the popularity of large houses and apartments of between 50 and 100 pings (165m2 and 330m2), especially in Taipei City.

The figure is, however, a bad sign for the market as people are less willing to buy due to reduced purchasing power, Ma said.

In another poll conducted by the institute on banks and real estate agents, the confidence index for the market in the final quarter of last year hit 99.15 points, the lowest level in two years.

The poll found that most people tend to buy houses for their own use, rather than as an investment.

As houses are increasingly unaffordable, many potential buyers are biding their time in the hope that the situation will improve, the poll said.

As a supply glut is expected from the second quarter of this year, buyers should act now, as an oversupply gives them increased bargaining power, Chang said. To reduce pressure on buyers, Hua Yi-chang (華宜昌), a senior researcher at the institute, said that housing loan repayments should not account for more than 30 percent of dispensable annual income.
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