Although the Financial Supervisory Commission (FSC) may propose putting a stop to the government's preferential housing loans scheme, the nation's property market is unlikely to be greatly affected against the current benign backdrop of low interest rates and abundant fund flows, a leading figure in the real estate development industry said yesterday.
"It is time for the preferential loan project to retire now ? after it successfully boosted the nation's property market," Lai Cheng-i (
Even without the incentive scheme, the market can be sustained by the low mortgage rates because of an excessive supply of funds for the next three to five years, Lai said.
The FSC is considering whether to suggest that the government stop offering the scheme as part of the financial watchdog's plan to tighten the nation's lending for housing as a precautionary risk control, the Chinese-language Commercial Times reported yesterday.
The commission said that the amount of housing loans to both home buyers and developers has accumulated to 25 percent of the total amount of banks' deposits and bank debentures, approaching the regulatory ceiling of 30 percent.
The financial regulator said that it hoped that banks would keep prudent risk management in mind while lending to home buyers.
An Executive Yuan spokesman told the Taipei Times yesterday that the proposal is not a concrete policy yet.
"The issue needs to be discussed by the inter-department financial and economic panel that is led by Vice Premier Tsai Ing-wen (蔡英文) and meets weekly," Cabinet Spokesman Cheng Wen-tsang (鄭文燦) said in a telephone interview.
Cheng did not give a time frame for when a decision would be made.
The government started to subsidize home buyers in 1998 by providing loans charging lower interest rates through selective lenders in a bid to stimulate the nation's lackluster real estate sector.
The authority then extended the offer several times, bringing the total balance of the preferential loans to NT$1.8 trillion (US$55 billion).
However, the latest batch of government housing loans -- worth NT$300 billion in May last year -- appeared much less attractive to home buyers because they had an interest rate of 3.04 percent, compared with other housing mortgage schemes in the market that offered rates as low as 1.98 percent, according to Shining Group's data.
Up to NT$13 billion of the government loans remain unused so far, the data showed.
The turnabout was caused by a price war as local banks refocused on the secured housing mortgage business after suffering from mounting unsecured consumer bad debts that began in the middle of last year.
Nevertheless, Fitch Ratings warned last week that the narrowed interest margins of housing loans that were the result of keen price competition would not be sufficient to cover potential credit loss once the property market subsides, which could expose local lenders to rising risks.
Cathay Financial Holding Co (國泰金控), the nation's largest financial group by assets, told investors last month that the company had taken an extra-cautious attitude towards housing mortgages after experiencing the consumer credit problems.
As a response, Cathay has accordingly adjusted its lending portfolio through stricter credit checks for granting housing loans.