Prospective home buyers might have to come up with bigger down payments as local banks become increasingly conservative in issuing housing loans with the central bank warning against lax lending practices, a report by My Housing Monthly said yesterday.
New houses in northern Taiwan with loan-to-value ratios (LTVs) of 80 percent dropped to 49 percent of all cases this year, the lowest since 2018 when the property market started to improve, the report said.
Ho Shih-chang (何世昌), research manager at the Chinese-language publication, attributed the retreat in LTV ratios to the central bank’s pleas with local lenders to avoid loose housing and land financing.
Photo: Hsu Yi-ping, Taipei Times
“The [central bank’s] moral suasion and two waves of selective credit controls appear to have worked, judging from the lending trend,” Ho said.
The findings suggest that more than 50 percent of new housing projects were unable to secure equally favorable lending terms, the analyst said.
Buyers would have to fork out more money when developers turn over ownership of completed residences, Ho said.
LTV ratios averaged 80 percent for new homes before the central bank capped them at 40 percent for corporate buyers and 50 percent for multiple homeowners.
The lending limits for luxury housing, unsold houses and land financing must not exceed 55 percent, the central bank said.
LTV ratios slumped to 21 percent in 2016, as lenders avoided housing loans as the property market languished, Ho said, adding that developers had to provide lending from their own pockets to stimulate sales.
LTV ratios rose to 80 percent as the property market picked up, accounting for more than 60 percent of new housing projects in 2019 and last year, aided by a stable economy, capital repatriation and companies returning from overseas amid a global electronics supply realignment, Ho said.
Product type matters more than location in winning high LTV ratios, with two-bedroom apartments enjoying better lending terms, My Housing said.
Small apartments have been an easy sell over the past few years, while large luxury homes have difficulty finding buyers, it said.
LTV ratios generally stand at 70 percent for people with relocation needs, Ho said, adding that first-home buyers and those purchasing a house to relocate are not subject to selective credit controls.
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