Academics see real-estate bubble

CORRECTION LOOMS::With almost half of the nation’s GDP concentrated in the real-estate sector, professors say a slowdown could have dire effects on the economy

By Crystal Hsu  /  Staff reporter

Fri, Mar 30, 2012 - Page 12

Academics yesterday warned the government to watch out for overinvestment in real estate after real estate-related financing approached 50 percent of GDP in January.

Real estate-linked financing — including loans for home purchases, repair and construction — totaled NT$7.15 trillion (US$242.09 billion) at the end of January, accounting for 48.15 percent of GDP, which was valued at NT$14.85 trillion in December last year, said Chuang Meng-han (莊孟翰), a professor of industrial economics at Tamkang University.

“The high ratio is worrying, as it may crowd out funds for investment in other sectors and sustain housing prices” that have remained unresponsive thus far to the government’s measures to facilitate a correction, Chuang told a property seminar in Taipei.

The liquidity-driven boom will continue now that life insurance firms are also showing interest in purchasing storefronts because of the scarcity of commercial buildings, Chuang said.

Construction financing more than doubled in the past decade, while home loans have increased by 90.52 percent and savings deposits have risen by 56.73 percent, Chuang said.

The figures suggest that land developers spearheaded the property boom, while simultaneously contributing to the large increase in unoccupied housing, the academic said.

More than 1.56 million housing units in Taiwan are unoccupied, with 44 percent of them concentrated in the north, Chuang said.

“There is no quick fix to increasingly unaffordable housing,” Chuang said. “The government has probably missed the best opportunity to address the situation, but continued delay may prove a dangerous mistake in the long run.”

Chang Chin-o (張金顎), a professor at National Chengchi University’s land economics department, also expressed concern over the heavy concentration of funds in the housing market.

“Overinvestment in a single sector is not positive for the nation’s overall competitiveness and may spell problems once the industry enters a correction,” Chang said. “A boom cycle cannot last forever.”

Chang said the government, like the general public, also relies on the private sector for information to guide its housing policy, lending support for market transparency and accountability.

A requirement introduced on July 1 for home buyers and brokers to register transaction data online should be the beginning, not the end, of the government’s efforts to put the -market on a healthy course, Chang said.

The academic questioned the truth in recent reports of a revival in purchasing interest on the part of home buyers, saying this might be another advertising tactic adopted by land developers to boost sales.

Construction firms and brokers have reported an increase in the number of people looking for houses over the spring season, beginning yesterday. Billy Yen (顏炳立), general manager at DTZ, an international real-estate services provider, said he did not believe in the existence of the so-called March 29 season.

“It is fair prices, not the timing of transactions, that top the list of concerns of home buyers,” Yen said.