Taiwan’s homes prices may fall as much as 10 percent in the second half after the central bank told financial institutions to take steps to prevent speculation, Citigroup Inc said.
“I think it will definitely hurt the secondary market,” Citigroup analyst Dave Chiou (邱義昇) said in a telephone interview in Taipei. “We are actually seeing a lot of speculators sell their inventories in the market.”
In a July 2 letter to the chairmen of all financial institutions in Taiwan, central bank Governor Perng Fai-nan (彭淮南) asked for steps to be taken to prevent housing speculation after complaints from the public, a statement on the bank’s Web site on July 11 said.
The move comes as lending expands and prices rise, spurred by record-low interest rates. The central bank raised its benchmark rate to 1.375 percent on June 24 as the economy recovers and introduced a 70 percent cap on loans for second homes while ordering banks not to extend further loans for renovations.
Speculators favor existing homes in Taiwan because homes older than 30 years have a higher built-up space relative to land space, said Chiou, part of a team ranked first for Taiwan research by Institutional Investor for 2008 and last year. That means that developers will offer higher prices for older homes, he said.
The market for new homes may take longer to be affected by the policies, said Chiou, who has been analyzing the country’s property market for seven years.
“There’s less speculation in the pre-sale market,” Chiou said. “Most people buying are buying for upgrades, so prices are going to be fairly stable.”
The central bank said on July 8 it met with executives from commercial banks following reports that some lenders classified home loans taken out by executives as corporate loans, instead of consumer banking, to evade the stricter rules.
“It’s been hard for the central bank to prevent these actions even after the recent measures,” Perng wrote in the July 2 letter. “Please explain to your workers to closely guard against such cases, as effectively controlling this risk is better for the healthy development of the housing market.”
Housing prices in metropolitan Taipei may climb 10 percent this year, Lee Jain-ming (李健銘), a researcher at Sinyi Realty Co (信義房屋), said in May. Higher interest rates may have little effect on damping prices as wealthy buyers don’t need to rely on bank loans to fund purchases, he said at the time.
Housing prices in Taipei climbed 4.8 percent in the first quarter, Lee said.
Home prices in Hong Kong have risen almost 40 percent from the beginning of last year, Norman Chan (陳德霖), chief executive of the Hong Kong Monetary Authority, said on May 20. Private residential sales in Singapore rose to a nine-month high of 2,208 in April, the Urban Redevelopment Authority said, the highest since last July.
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