Taipei Times: The government plans to tighten requirements for urban renewal projects to better protect the rights of land owners. What are your views on the move?
Lee Wen-tsao (李文造): Authorities concerned should figure out for themselves what they really want. Urban regeneration is already a very difficult undertaking within the existing rules. Successful cases are few and far between, given the amount of time and resources required. I suggest the government either take full responsibility for initiating urban renewal projects or simply wash its hands of it, which would allow construction companies and land owners to settle disputes among themselves.
The government cannot encourage urban regeneration while seeking to tie the hands of construction firms. Such a practice is contradictory and hurts all parties involved as demonstrated by the stymied case with the Wang family in Taipei’s Shihlin District (士林). At least 80 percent of existing houses in Taiwan could collapse if a massive earthquake (measuring 7.6 on the Richter Scale) were to hit, like the one in 1999. Safety concerns alone lend support to urban regeneration projects because houses built since then are more quake-resistant.
TT: What are your views on the central bank’s moves to tighten lending for luxury houses?
Lee: I don’t think it is fair or wise. Global central banks are easing monetary policies to stimulate economic growth and the central bank should bear that in mind.
While the construction sector is only part of the industry, it plays a critical role in driving the economy. If the sector goes into recession, then other businesses — such as suppliers of plastic, steel, furniture, hardware and home appliances — will suffer as well. The government is well aware of the potential fallout, but is unwilling to admit it for political reasons.
The central bank has already tightened real-estate financing and it asked state-run banks to raise interest rates to 2 percent on land and mortgage loans, whereas borrowing costs for companies in other sectors are lower than that threshold.
Nevertheless, the interest rates remain very low and will continue to shore up housing prices. Idle funds will keep flowing into real estate as they serve as a better defense against inflation and market volatility. The lack of alternative investment choices also lends a helping hand.
TT: How will the housing market fare for the rest of the year with economic downside risks increasingly evident?
Lee: Efforts to predict the performance of the local housing market based on past experience or on the global economy have proved futile. Personally, I don’t see a bubble on the horizon as some academics have been warning would happen for years.
The belief that “to own land is to own wealth” (有土斯有財) is deeply ingrained in Chinese culture and accounts for sustained demand for home ownership.
On average, housing prices in Greater Taipei doubled over the past decade, with nationwide figures only slightly lower. That translates into an increase of 10 percent a year, a healthy profit amid GDP growth of 5 percent, in my view.
Housing prices doubled in 1973 and 1979 and threefold in 1990. The government did not take action to check the property fever, but prices stabilized of their own accord. That is how the market economy works — regulated by an invisible hand.