Property prices unexpectedly climbed to a 13-year high in the last quarter of the year, sending a stronger sign that the market is overheating and deepening worries that the bubble could be on the brink of bursting next year, the government’s latest survey showed yesterday.
Two months ago, a research team from National Chengchi University, working on behalf of the Ministry of the Interior, said it expected the property market to cool down slightly in the second half of this year because of the central bank raising interest rates and a reduction in the number of mortgages granted in the greater Taipei area, measures aimed to curb speculation.
Instead, the property market reading rose one point to 15 last quarter in a upward spiral which has not been seen since the third quarter of 1997, the survey showed.
Increases in the unit prices of new housing projects, one of four indices tracked by the research team, boosted last quarter’s performance from 14 points in the second quarter, the survey showed.
“That indicates that the government’s measures have failed to curb speculative trading,” said Chang Chin-oh (張金鶚), a land economics professor at National Chengchi University, who is in charge of the research team.
“Speculative investors will not even feel the pinch of higher borrowing costs should the central bank raise interest rates 12.5 basis points [as most analysts forecast] this month,” Chang said. “Government agencies should look to introduce more drastic measures.”
Forbidding local lenders from granting bank loans to borrowers who use idle land as collateral could be an effective approach, Chang said.
The leading index for the housing industry rose 1.12 percent to 95.88 in the third quarter, from the second quarter’s 94.82, indicating that the boom would carry into next year.
The latest survey showed that more than 70 percent of respondents, including property developers and banks, expected prices to remain stable or increase moderately in the first half of next year, after breaking record-highs this year.
However, Chang warned that “prices may experience a correction in the longer term, as prices of houses in certain areas have diverting from their normal course.”
Looking at the fundamentals, growing supply and limited increase in household income, which means it has become less affordable to buy a home, would go against the trend of rising prices, the survey found.
“Next year will be a stormy year. A correction could occur at any time,” Chang said.
As the property price bubble swells, the risk of the bubble bursting is already on the horizon, he said.