Over the past two weeks, two top government officials have sounded the alarm over Taipei’s housing market, warning that signs of a bubble are emerging. Their remarks appear to show that the years they have fought to curb rising housing prices have been in vain and clearly demonstrate how hard the battle has been.
On Wednesday last week, Minister of Finance Chang Sheng-ford (張盛和) said Taipei’s real-estate market satisfies some criteria of a housing bubble. These criteria include a lower return on rental investment, a higher price-to-rent ratio in the city and an even higher price-income ratio for residential housing.
Chang’s remarks came a week after central bank Governor Perng Fai-nan (彭淮南) said that housing prices in Taipei are extremely high, as the average prices here are more expensive than those in Japan.
However, such remarks are nothing new. Economists and market watchers have been warning of asset bubbles for a long time. Even Taipei Deputy Mayor Chang Chin-oh (張金鶚) spoke of a possible real estate bubble in 2008, when he was a professor of land economics at National Chengchi University.
The question now is whether the government can effectively tackle the problem. What is needed is a concerted effort from various agencies and an effective implementation of financial and monetary tools.
Make no mistake, having introduced policies related to a special levy on short-term property transactions, the registration of actual prices of real-estate sales and the selective credit controls on banks’ housing loans, President Ma Ying-jeou’s (馬英九) government knows very well how damaging rampant property speculation would be. However, housing prices, especially those in Taipei, have continued rising, due to low interest rates and still-strong liquidity in the market. And the increase in prices in Taipei has had a spillover effect in New Taipei City (新北市) next door.
Based on the government’s latest data, a house in Taipei costs the equivalent of 12.4 years of the average salary, compared with an average of 8.4 years in Taiwan as a whole. In New Taipei City, people would have to spend about 9.6 years of their incomes on average to purchase a home, more than the 7.4 years needed in Greater Taichung and 7.2 years in Greater Kaohsiung.
According to economists, an average of five years’ salary is a reasonable price for a house, but an overall rise in property prices in major cities has made this goal increasingly unrealistic.
Last week, Chang said the answer is urban renewal, but the deadlock over the Wenlin Yuan urban renewal project in Shilin District (士林) has demonstrated how complex the urban renewal process is.
Chang seems to forget that it is the years of cuts by the Ministry of Finance in the land value increment tax, inheritance and gift tax and business income tax that has led to a build up of liquidity in the market and generated an M-shaped society in Taiwan, where the rich get richer, the poor become poorer and the middle class is further stretched.
Even though the central bank knows the keys to rising housing prices are low interest rates and ample liquidity, it is in no rush to raise interest rates given the sluggish economy.
Actually, monetary policies need to be rolled out along with effective taxation measures in order to curb rising property prices.
People do not need to hear more talk of property bubbles from government officials, but they are watching closely to see whether policymakers can work out good strategy and have the guts to tackle the problem. It is true that increasing supply could help bring down prices, but taxation measures such as altering the rate of capital gains tax on the sale of real estate would be more effective, if done correctly.
Because much of what former US president Donald Trump says is unhinged and histrionic, it is tempting to dismiss all of it as bunk. Yet the potential future president has a populist knack for sounding alarums that resonate with the zeitgeist — for example, with growing anxiety about World War III and nuclear Armageddon. “We’re a failing nation,” Trump ranted during his US presidential debate against US Vice President Kamala Harris in one particularly meandering answer (the one that also recycled urban myths about immigrants eating cats). “And what, what’s going on here, you’re going to end up in World War
Earlier this month in Newsweek, President William Lai (賴清德) challenged the People’s Republic of China (PRC) to retake the territories lost to Russia in the 19th century rather than invade Taiwan. He stated: “If it is for the sake of territorial integrity, why doesn’t [the PRC] take back the lands occupied by Russia that were signed over in the treaty of Aigun?” This was a brilliant political move to finally state openly what many Chinese in both China and Taiwan have long been thinking about the lost territories in the Russian far east: The Russian far east should be “theirs.” Granted, Lai issued
On Tuesday, President William Lai (賴清德) met with a delegation from the Hoover Institution, a think tank based at Stanford University in California, to discuss strengthening US-Taiwan relations and enhancing peace and stability in the region. The delegation was led by James Ellis Jr, co-chair of the institution’s Taiwan in the Indo-Pacific Region project and former commander of the US Strategic Command. It also included former Australian minister for foreign affairs Marise Payne, influential US academics and other former policymakers. Think tank diplomacy is an important component of Taiwan’s efforts to maintain high-level dialogue with other nations with which it does
On Sept. 2, Elbridge Colby, former deputy assistant secretary of defense for strategy and force development, wrote an article for the Wall Street Journal called “The US and Taiwan Must Change Course” that defends his position that the US and Taiwan are not doing enough to deter the People’s Republic of China (PRC) from taking Taiwan. Colby is correct, of course: the US and Taiwan need to do a lot more or the PRC will invade Taiwan like Russia did against Ukraine. The US and Taiwan have failed to prepare properly to deter war. The blame must fall on politicians and policymakers