Central bank governor Perng Fai-nan (彭淮南) said yesterday that a housing bubble is not imminent, as property price hikes are limited to certain areas, adding that the bank has adopted “targeted prudential measures” to curb real-estate speculation. Among these measures, Perng said that state-owned banks have done “very well” in improving their risk controls for home mortgages at the prompting of the central bank.
“A majority of banks have lowered their loan-to-value ratios for home investors from 80 percent to 70 percent, with mortgage interest rates rising between 0.25 percentage points and 0.5 percentage points,” Perng said during a legislative session yesterday. “Some banks have even shortened or canceled grace periods for home loan repayments.”
However, he stressed that the measures that banks have adopted to tighten credit are selective and therefore would not affect the general public.
Other countries in Asia have imposed transaction taxes on home purchases, Perng said.
“In Singapore, a stamp tax of 3 percent is imposed on houses sold within one year of purchase. In Hong Kong, a stamp tax on luxury homes worth more than HK$20 million [US$2.58 million] has been raised to 4.25 percent, up from 3.75 percent,” he said.
Bombarded with questions from legislators across party lines as to whether the central bank would raise interest rates this quarter, Perng remained tight-lipped, saying that it will be decided at the bank’s next policy meeting, scheduled for next Thursday.
Amid growing public demand for Chinese currency, Perng said that negotiations on cross-strait currency settlement have “gone smoothly,” and that he expected that banks on both sides of the Taiwan Strait would soon be able to directly settle currency transactions.
“There is no need to include this matter in an economic cooperation framework agreement [ECFA] with China,” Perng said, adding that the issue will hopefully be finalized before the signing of the cross-strait trade pact.
The central bank has also closely monitored capital inflows to the nation to determine whether they are being used for their declared purposes to invest in local shares and bonds.
Perng said that in the past 14 months, the aggregate amount of foreign capital coming in and out of the nation was US$290 billion. Out of a total of 5,000 foreign accounts, only 20 accounted for 40 percent of this capital.
The central bank will pay close attention to these 20 accounts as they are “the sources of the so-called hot money,” Perng said, adding that around NT$250 billion has yet to be invested in the equity market.
Perng said that the amount of cash in foreign capital used to borrow securities has surged from 20 percent to 93 percent recently, which merits particular attention.
Asked whether borrowing securities is considered an investment in the stock market, Perng said that the central bank is in the process of consulting with the Financial Supervisory Commission.
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