The central bank yesterday inched up its key interest rates by another 0.125 percentage points and continued targeted credit tightening measures to cool down the Taipei area’s red-hot real estate market, which analysts said would stabilize property prices in the capital.
The hike — the second this year — brought the discount rate to 1.5 percent, the rate on collateralized loans to 1.875 percent and the rate on unsecured loans to 3.75 percent, the central bank said.
“Housing prices [in the Taipei area] will be stabilized following the rate hike. This will have a positive impact on the local property market,” Citigroup Taiwan chief economist Cheng Cheng-mount (鄭貞茂) said.
The economist said the rate hike would affect the property market more than the foreign exchange market amid worries the move could attract more hot money into Taiwan and further appreciate the NT dollar.
“Although room for home price negotiation in certain areas has increased and property transactions have shrunk in recent months, property prices still remain at high levels,” the central bank said.
As a result, the monetary regulator said it would continue to execute targeted prudential measures to rein in rocketing housing prices and that it would enhance moral suasion with local mortgage lenders on risk management.
The central bank adopted credit tightening measures in June to curb real estate speculation in major cities, including capping each home mortgage in the Taipei area at 70 percent of collateral and barring extensions on the repayment of the loan’s principal amount.
“The rate hike will definitely contain rising housing prices as property investors will become more conservative,” Chang Chin-oh (張金鶚), a land economics professor at National Chengchi University, said by telephone.
While some market analysts had expected that the central bank would have adopted stricter credit control on land financing to cool down the hot property market, the central bank said housing prices had dropped over the past few months.
“Housing prices have declined 2.88 percent since June,” central bank Governor Perng Fai-nan (彭淮南) said yesterday, citing data by H&B Realty (住商不動產).
Taiwan Realty Co (台灣房屋) analyst Chiu Tai-hsuan (邱太?), however, said liquidity was still abundant in the market as prices of land, storefronts and office buildings in Taipei hit record highs in recent months.
The central bank said the -interest rate hike was a result of the nation’s strong economic growth and rising consumer prices, and reflected hopes of gradually bringing relatively low interest rates back to normal levels.
The nation’s economy expanded 12.53 percent in the second quarter, as strong recovery in Asia’s emerging markets led to substantial growth in local exports and private investment.
Perng, however, noted that hot money inflows were disrupting emerging market economies, and said the central bank would continue to “closely monitor” the fund flows in and out of Taiwan.
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