The real estate market should see a limited rise in prices in the long term given stagnant income growth, but it is unlikely to nose-dive in the near term even though Taiwan is experiencing a housing bubble now, a National Science Council report said yesterday.
The report attributed the root cause of soaring housing prices to the repatriation of funds by overseas Taiwanese businesspeople following a reduction in inheritance and gift taxes, as well as public expectations of further trade liberation across the Taiwan Strait.
National Chengchi University economics professor Steve Lin (林祖嘉), one of the authors of the report, said that Taiwan is experiencing a housing bubble that is bigger than the one in the US that burst in 2008 and triggered a global financial crisis.
“There’s still plenty of capital flowing into the local property market. I don’t think housing prices will immediately drop unless the government adopts very strict measures,” Lin said.
However, since a majority of the public cannot afford to buy homes as salaries have failed to keep pace with the surge in property prices, housing prices are unlikely to continue rising in the long term, he said.
Lin said that the US real estate bubble burst because of a sharp government-led hike in interest rates from 1 percent to 5 percent.
In contrast, Taiwan’s central bank has kept interest rates low and only adopted selective credit controls to rein in housing prices, he said.
“Just because there’s a housing bubble doesn’t mean that it will necessarily burst,” he said, voicing support for the government’s “mild” measures to curb rising prices.
Lin also blamed rampant property speculation and opaque real estate information for the sharp increase in prices, urging the government to introduce legislation on publicizing property transactions and levying housing taxes based on the actual price of the property.
Moreover, he said that the government should speed up urban renewal projects and transportation infrastructure in the suburbs to increase housing supply and halt soaring property prices.
In response to concerns that expanding transportation networks seemed to fuel housing price hikes, Lin said it’s just a “short-term phenomenon,” adding that property prices would eventually go down when housing supply becomes sufficient.
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