The nation’s property reading rose to its highest level in six and a half years last quarter, but most local land developers and lenders expected housing prices to drop mildly in the second half of the year as further credit-tightening measures drive up borrowing costs, a government survey showed yesterday.
The central bank selectively tightened credit and raised its key interest rate by 12.5 basis points in June in an attempt to keep the property market from overheating, but the effect seemed to be limited.
Last quarter, the property reading increased to 14 points, but a growing number of land developers and lenders were expecting to see a mild contraction in transactions and prices, according to the survey conducted by National Chengchi University on behalf of the Ministry of the Interior.
“The property market looks to have peaked in the second quarter as more signs show a slowdown,” said Chang Chin-oh (張金鶚), a professor and director at the university’s Taiwan Real Estate Research Center.
The government’s “relatively mild” measures to prevent the property market from overheating, as well as stagnant household incomes, would be the main reasons, Chang said.
The survey showed that about 50 percent of the polled companies forecast property prices would drop by between 3 percent and 10 percent in the second half of this year from the first half.
“The market is still quite a way from healthy and needs stricter and persistent government measures to bring it back on track. Borrowing costs are way too low,” Chang said. “The government’s actions did not intimidate speculators at all.”
Chang said rather than relying on market forces, the central bank should further restrict lenders from providing loans to construction companies, which would be more effective in reining in skyrocketing housing prices that have resulted in price gouging by land developers, construction companies and speculators.
He cited an example in 1989 when the monetary regulator banned local financial institutions from lending money to any construction companies, a move that ended a three-year rise in housing prices.
Construction loans last month surged to the highest level this year at NT$1.17 trillion (US$37.4 billion), according to the central bank’s statistics released on Monday.
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