The central bank met with eight local lenders on Thursday to call for restraint in real-estate financing, which approached a record high in September, sparking concern that it might drive up property prices.
The meeting came less than a week after the monetary policymaker’s talks on Friday last week with six mortgage operators to convey its concern over loose lending.
“Banks should better manage their resources to prevent an overflow of credit to the real-estate market, which indirectly encourages property speculation and land hoarding, and contributes to property price hikes,” the bank said in a statement.
Photo: Wu Chi-lun, Taipei Times
Government data showed that commercial property and land deals last quarter soared at paces rarely seen in recent years, bucking sharp declines around the world amid the COVID-19 pandemic.
Property analysts have attributed the fast pickup to Taiwan’s stable economy and quick control of the outbreak, with low interest rates and ample liquidity also lending support.
The central bank in March cut the rediscount rate to a record low of 1.125 percent to ease households’ financial burden, but that inadvertently became an incentive for property investment after Taiwan emerged from the outbreak in May.
As of September, real-estate lending stood at 35.8 percent of total outstanding loans, close to the historical peak of 37.9 percent, the central bank said, adding that several banks are approaching the limits for mortgage, construction and land financing.
Local banks have offered generous loans at cutthroat borrowing costs and with protracted grace periods, as they vie for customers, the bank said.
Lax lending includes unreasonable loan-to-value ratios, failing to monitor the progress of property developments and easy loans for unsold housing units, it said.
Such practices encourage land hoarding and excessive leveraging that are pushing up property prices, posing a threat to the health of the nation’s property market and financial system, the bank said.
“Lenders must take up their social responsibility and guide funds to real investment that can create job opportunities and boost income rather than overly concentrating on property lending,” the bank said.
Small and medium-sized companies affected by the pandemic can use help from financial institutions, it said.
Central bank Deputy Governor Chen Nan-kuang (陳南光) has several times expressed concern over the formation of a property bubble and pressed for pre-emptive measures to reverse the trend.
The central bank said it has sent officials to visit lenders to see if they exercise due caution when handling real-estate loan requests.
It denied that such visits are “formal inspections.”
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