The central bank is expected to maintain selective credit controls for the third time if local banks’ aggregate mortgage lending continues rising at a double-digit rate, DBS Bank Ltd’s Singapore-based chief economist Ma Tieying (馬鐵英) said yesterday.
The central bank on Dec. 7 last year imposed new selective credit controls on real-estate financing and further tightened its grip on March 18. These entailed imposing a cap on the loan-to-value (LTV) ratio, which now stands at 55 percent for individuals who want to buy a third house and 50 percent for those who plan to buy a fourth one, central bank data showed.
The LTV ratio is the ratio of the amount of mortgage to the appraised value of the property. The ratio is capped at 40 percent for corporate buyers, regardless of whether they are buying their first or second property, the central bank said.
Photo: Lee Chin-hui, Taipei Times
The central bank’s recent tightening moves were not the most severe in Taiwan’s history, Ma told a news conference.
“In 2014, the central bank set a limit on the LTV ratio for individual buyers who wanted to buy a second house, and reduced the cap on the ratio for those who wanted to buy a third house to 50 percent,” Ma said. “There is still room for the central bank to further squeeze credit controls.”
The bank is expected to take the pace of increase in mortgages into account, rather than the growth rate in housing prices, when deciding if it should tighten credit controls for the third time, she said.
“House prices have not risen by a double-digit percentage in Taiwan, but the growth in mortgages has even outpaced Taiwan’s GDP growth, suggesting that the mortgage-to-GDP ratio has increased,” Ma said.
The central bank would be concerned if the average mortgage-to-household income ratio expands, as it would indicate a rising household leverage ratio and increasing instability in the financial system, she said.
Asked if the central bank might be worried that credit controls would hurt the property market and curb an economic recovery, Ma said that the bank would prioritize financial stability over a single sector.
DBS has revised up its forecast for Taiwan’s inflation to 1.5 percent from 1 percent, and expects the central bank to use three tools to ease inflation concerns: stepping up open-market operations, tightening selective credit controls and hiking the reserve requirement ratio.
“There is a more than 50 percent chance that the central bank would use the first two tools, as it had done before. The possibility is lower for the third instrument,” Ma said.
Several hundred people have already booked their tickets and begun training for a spectacular voyage: a few minutes, or perhaps days, in the weightlessness of space. The mainly wealthy first-time space travelers are preparing to take part in one of several private missions which are preparing to launch. The era of space tourism is on the horizon 60 years after Soviet cosmonaut Yuri Gagarin became the first person in space. Two companies, Virgin Galactic and Blue Origin LLC, are building spacecraft capable of sending private clients on suborbital flights to the edge of space lasting several minutes. Glenn King is the director of
SPECULATION: The integrated house and land transaction income tax has been amended as the real-estate market heats up because of high liquidity and low interest rates Lawmakers across party lines yesterday agreed to July 1 as the provisional date on which a draft amendment to the Income Tax Act (所得稅法) is to come into effect, with the aim of curbing real-estate speculation. The consensus was reached following interparty negotiations at the legislature’s Finance Committee to determine when revisions to the “integrated house and land transaction income tax” would take effect. The committee on Monday last week passed a number of revisions to the act, but failed to agree on when they would take effect. Under the proposed revisions, the tax would be set at 45 percent
TAICHUNG PLANT: An official said that generator No. 3 had been retrofitted and it generates 0.46g of particulate pollution per kilowatt-hour, down from 0.6g to 0.7g A spike in demand for electricity made it necessary to restart the third coal-fired generator at the Taichung Power Plant, Taiwan Power Co (Taipower, 台電) said yesterday as a feud with the Taichung City Government lingers. Taichung Mayor Lu Shiow-yen (盧秀燕) has sought to keep the generator from being used. In 2019, he revoked Taipower’s license to operate the generator. However, the state-run utility has taken the city government to court over the license revocation and won the case in February last year, Taipower manager Chang Ting-shu (張廷抒) said. “We would like to remind the Taichung City Government that operation of the third
Broadband providers are seeing delays of more than a year when ordering Internet routers, becoming yet another victim of chip shortages choking global supply chains and adding challenges for millions still working from home. Carriers have been quoted order times as long as 60 weeks, more than doubling previous waits, said people familiar with the matter, who asked not to be named because the discussions are private. Sharp COVID-19 manufacturing shutdowns a year ago were exacerbated by a prolonged surge in demand for better home broadband equipment, said Karsten Gewecke, head of European regional business for Zyxel Communications Corp (合勤), a Taiwan-based