The nation’s housing market is likely to remain sluggish in the current quarter and beyond amid a gloomy economic outlook and because the new luxury tax has yet to trigger a price correction, a government survey showed yesterday.
“Prospective home buyers will remain on the sidelines as the presidential election and Europe’s sovereign debt crisis unfold,” Chang Chin-oh (張金鶚), a land economics professor at National Chengchi University who was commissioned by the Construction and Planning Agency to conduct the quarterly survey, told a media briefing.
Chang advised real-estate investors to flee the market before it is too late, saying that it is just a matter of time before a major correction begins, which could last for two or three years once it is set in motion.
According to Chang, the falling volume of housing transactions last quarter lent support to his observations, although home prices continued to remain fairly stable.
Home transfers totaled 46,796 units nationwide between July and September, down 16 percent from the second quarter, while trading prices dropped 10 percent to an average of NT$9.57 million (US$315,373) as buyers settled for smaller, previously lived in dwellings, the survey found.
The trend explained why housing prices climbed to a new high of NT$62,200 per ping (3.3m2) in Taipei despite a sharp 21 percent drop in trading volume, the survey said.
Meanwhile, investments picked up in Taoyuan, Hsinchu and Miaoli counties because home costs were more affordable there, Chang said.
“The global economic uncertainty is rubbing salt into the [domestic] housing market’s wound, which was already beleaguered after the implementation of the luxury tax” in June, Chang said.
It is unrealistic to expect the market to remain bullish any longer after witnessing seven years of boom, the academic said.
High housing prices continued to pose a heavy financial burden on owners as they constituted 9.2 times the average household’s annual income in the third quarter, up from 9 times greater three month earlier, the survey showed.
The average transaction price for homes sold in Taipei during the last quarter was 14 times the average annual household income, down from 16 times three months earlier, as buyers shunned higher-priced properties, the survey indicated.
The ratio is too high, Chang said, suggesting a reasonable ratio is about 5 times so home owners have enough money to budget for food, entertainment and other expenses.
Mortgage payments rose from 34 percent to 34.6 percent of annual household income last quarter and took up 46.6 percent of households’ income in Taipei, up from 40.4 percent in the previous quarter, the survey showed.
About half of respondents surveyed expect housing prices to rise in the coming year, which might render the luxury tax ineffective, Chang said, urging the government to review the levy’s implementation.