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Property price rise mild: Perng

Chinese Nationalist Party (KMT) Legislator Lai Shyh-bao holds up a NT$100 bill yesterday while questioned whether images of Sun Yat-sen would soon disappear from the bill at a meeting of the legislature's Finance Committee. Central bank Governor Perng Fai-nan said that a proposal by Lai to move the bank to Kaohsiung was unfeasible because Taipei is the nation's financial center. PHOTO: CNA

The nation's real estate market has shown only a mild price increase over the past decade compared with other nations, although the transaction volume last year broke a 1998 record high, central bank Governor Perng Fai-nan (彭淮南) said yesterday.

Perng's comment was made in response to Chinese Nationalist Party (KMT) Legislator Lai Shyh-bao (賴士葆) in the legislature's Finance Committee, who asked him whether the nation's housing market was overheating and whether the central bank would adopt any precautionary measures.

Citing a report published in the Economist in December last year, Perng said among 17 nations surveyed between 1997 and last year, 10 saw their housing prices shoot up by more than 100 percent and four up by more than 60 percent.

Only three markets -- Hong Kong, Japan and Germany -- reported declines.

"Taiwan was not included in the survey but based on Cathay [Real Estate Development Co's, 國泰建設] figures, Taiwan only went up by 4 percent," he said. "Taiwan's property price increase is relatively mild."

Meanwhile, the nation saw 450,000 housing projects change hands last year, including newly-built and second-hand houses -- the highest level recorded since 1998 -- the Ministry of the Interior's tallies showed.

The central bank attributed the sizzling transactions to low interest rates that have fueled a steady growth in market demand; sky-high prices of state-owned land during auctions; and the government's plan to allow more Chinese tourists to visit Taiwan.

These factors have driven demand for real estate investments, the monetary policymaker wrote in a report released in the finance committee.

In the press conference following the central bank's last quarterly meeting in December, Perng for the first time said the bank would keep a close eye on the housing market, hinting that it had started paying attention to whether the sector was overheating.

The policymaker is scheduled to hold its next board meeting on March 29 to discuss its monetary policy.

Since October 2004, the central bank has raised the benchmark interest rate 10 times for a total of 1.375 percentage points.

The current rediscount rate charged to commercial lenders is 2.75 percent.

People First Party Legislator Christina Liu (劉憶如) criticized the central bank, arguing that low interest rates had led to massive capital outflow.

Among 43 nations, Taiwan's short-term rate at 1.82 percent is only higher than that of Japan and its long-term rate at 2.05 percent is also among the lowest.

Since 2000, Taiwanese have wired NT$5.7 trillion (US$172.7 billion), or NT$800 billion per annum on average, overseas in pursuit of better investment returns, she said.

In response, Perng said that capital had also been flowing into the nation, and argued that monetary policy must take Taiwan's overall economic structure into consideration.

The central bank's data showed the nation had foreign exchange reserves of US$266.1 billion last year, up by US$12.8 billion from 2005. Foreign capital investing in Taiwan's stock market accounted for more than 50 percent of the figure, or US$150 billion, Perng said.

The governor also dismissed legislators' comments that the government might request that the central bank relocate to the south.

He said it was not possible for the government to make the request without moving the capital first because Taipei is the nation's financial center.

Legislators also questioned whether images of Sun Yat-sen (孫中山) would soon disappear from NT$100 bank notes, as the Democratic Progressive Party was considering removing references to Sun as the "father of the nation" in school textbooks.

Perng said the central bank would only launch new versions of bills when bill counterfeiting made it necessary.
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