State-run Hua Nan Financial Holdings Co (華南金控) expects mortgage loans to remain flat this year on the government’s plan to impose a heavy tax on speculative property transactions, top company executives said yesterday.
The downward revision from what was previously targeted as modest growth came after the Cabinet approved the plan to introduce luxury taxes that will apply to residential real estate sold within two years of purchase.
“We had projected 2 percent growth in mortgage lending for this year, a goal that appears in need of a downward revision if the luxury tax takes effect in July this year,” Kao Jung-cheng (高榮成), executive vice president of consumer banking at Hua Nan Commercial Bank (華南銀行), told reporters after an investors’ conference.
The bank now expects home loans this year to equal the year-earlier level at best, Kao said.
The banking arm contributed 90 percent to the group’s total earnings last year, during which home loans increased 22 percent year-on-year to NT$372.1 billion (US$12.61 billion), a company report showed.
The first two months saw -mortgage-lending climbing slightly to NT$380 billion, mainly because of a low season, Kao said. Last month, the lender set the goal of achieving NT$110 billion in new home loans this year, from NT$140 billion last year, after the central bank cut the loan-to-value ratio for second homes in the Greater Taipei area.
“The forecast is also in need of revision even though it is too early to tell the size of change,” Kao said.
However, the tightening measure, while set to dampen property transactions, may not seriously affect the lender’s profitability, bank executive vice president York Lai (賴明佑) said.
The increase in income from interest — following the central bank’s widely expected interest rate hikes this year — could offset the drop in mortgage lending, Lai said.
Overall, Hua Nan Bank aims to achieve 7 percent growth in total lending this year on growing loan demand amid a stable economic recovery.
“We expect healthy demand from both institutional customers as well as small and medium-sized firms,” said Derek Chang (張雲鵬), another Hua Nan Bank executive vice president.
That loan growth is expected to boost income from fees by a mild 5 percent this year, the Hua Nan official said.