Falling real-estate prices and diminishing trade volumes are now a definite trend. The Financial Supervisory Commission has told financial companies to start paying more attention to the risk of slumping prices in the real-estate market. Banks say that in recent years they have been approving bank loans cautiously and that the growth rate for real-estate credit has slowed. Insurance companies say that high real-estate prices have recently kept most companies from buying empty land and that very few are planning construction projects. Financial companies, for their part, say that since the end of last year the volume of trade in the real-estate market has shrunk and prices are slack. Whether these trends will cause prices to plummet, however, requires further observation.
The Financial Examination Bureau says that real-estate pricing indices, including those of Cathay Real Estate Development Co and the Ministry of the Interior, all show a dwindling trade volume and slumping prices. At the same time, the proportion of real-estate assets held by local banks and insurance companies is still on the high side.
According to statistics from the commission up to June this year, house loans, civil engineering project financing, loans for repairs and renovations, and all mortgage credit loans for real estate and factories amounted to NT$9.6 trillion (US$300 billion), or 39 percent of total loans granted, which is still relatively high. Insurance companies also hold real-estate investments and house loans, which are worth around NT$1.9 trillion. The assets and earnings of financial institutions will probably be affected as soon as real-estate price fluctuations appear.
Photo: Hou Cheng-hsu, Liberty Times
A wave of slumped housing prices hit in 2001, severely hurting several banks. The commission says that the quality of assets and earnings in the banking industry are the best they have ever been. However, since real-estate credit is up to NT$9.6 trillion, banks must be punctilious so as not to threaten earnings and banking operations.
Most banks and life insurance companies say that they have gotten stricter regarding price appraisals and have reduced the number of credit lines and raised interest rates on loans to decrease the potential risk of loss. Insurance companies, however, say that with high real-estate prices, companies like Cathay Life Insurance Co, which were once enthusiastic about buying buildings, have now shifted most of their investments to foreign real estate. Shin Kong Life Insurance Co and Fubon Life Insurance Co have recently purchased a lot of superficies land rights, while other life insurance companies’ desire to buy land is also not as strong as it was several years ago.
(Liberty Times, Translated by Kyle Jeffcoat)
1. trend n.
趨勢 (qu1 shi4)
例: She’s never been interested in the latest fashion trends.
2. dwindle v.
(jian4 jian4 jian2 shao3; bian4 xiao3)
例: Our funds are dwindling.
3. punctilious adj.
(jing1 mi4 xi4 xiao3 de5; ju1 jin3 de5)
例: Jack’s punctilious character kept him from ever taking any risks in life.
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