Taipei Times: How do you think Taiwan’s real estate market will fare in the second half of the year, given the impact of the luxury tax, the nation’s opening to independent Chinese tourists and various economic fundamentals?
Lai Cheng-i (賴正鎰): I believe the sector will see stable growth in the next three to five years. Interest rates remain the No. 1 influence on the sector. Today, the interest rate on housing mortgage loans remains low at about 2.5 percent a year and such low rates make home purchases practical and desirable.
China, which accounts for 40 percent of Taiwan’s exports, is expected to continue to post strong economic growth, even though Europe is plagued by a debt crisis and the US recovery is staggering.
More hot money may flow to Asia to take advantage of the region’s fast-growing economy.
Foreign investors are seeking opportunities to cooperate with Taiwanese firms in jointly tapping China’s [property] market.
All these are positive signs for the property market.
The only downside risk could come from the government as reflected in the introduction of the luxury tax last month to curb housing prices.
It was the new levy that made land developers more cautious about launching new construction projects last quarter.
Revenues from new construction projects totaled about NT$800 billion (US$27.72 billion) last year. Transactions are likely to stay flat this year because of the three-month lull. Without the tax, they would have hit NT$1 trillion.
TT: Are housing prices in Taiwan unreasonably high — many people are complaining that they cannot afford to buy a home?
Lai: That is not true. Only housing prices in Taipei and parts of New Taipei City (新北市) have picked up significantly. I don’t understand why people have to own houses in Taipei City, especially in prime locations such as Da-an (大安) and Xinyi (信義) districts.
The housing units we have built in Taichung average between NT$130,000 and NT$140,000 per ping. Second-hand homes can even cost between NT$90,000 and NT$100,000 per ping. Housing prices in Yunlin, Chiayi and Tainan counties are even lower.
The government’s unbalanced development plan is responsible for this price differential as it has utilized most government resources in the capital, financially and politically.
It could address this issue by strengthening infrastructure or building mass rapid transit systems in different parts of the nation, to encourage people to move.
That is why some people have said the government should move the capital to central Taiwan and relocate technological and industrial firms to southern Taiwan.
TT: That means we may see housing prices in Greater Taipei climb higher despite the introduction of the luxury tax?
Lai: Prices are determined by supply and demand. We have 50 people hunting for vacant plots in the Greater Taipei area, but we can only find two plots a year for development.
Scarce supply fuels the need for urban regeneration, but it usually takes five years or longer to finish a project. This limited supply makes a price correction unlikely in Taipei or New Taipei City.
In my view, it is healthy for housing prices to increase 5 percent annually.
The government’s attempt to curb price increase will only delay price hikes as shown in recently released housing price data and it is unlikely to have a more long-term impact.
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