Home prices in Taiwan jumped the most in six years in the first quarter and might reach new highs by the end of the year, although analysts say a soft lockdown and new curbs might slow deals and gains.
Average prices across the six special municipalities gained 5.7 percent year-on-year in the first quarter, while Tainan surged 9.9 percent and Taipei rose 4.9 percent, according to Ministry of the Interior data released last week.
Buyers were driven by expectations that prices would keep rising, and that affordability remains low, the ministry said.
Housing markets in the COVID-19 era look bubbly from Auckland, New Zealand, to Austin, Texas, thanks to record low rates, but prices in Taiwan defy more odds than most: The population is falling, more than one in 10 homes are vacant and decades of low wage growth have stretched affordability.
Prices have also risen despite the constant threat of invasion from China, and new rules to curb speculation might also fail to rein them in.
“The government is not bringing its ultimate game to fight the overly hot market,” said Yang Chung-hsien (楊宗憲), an associate professor and real estate specialist at National Pingtung University. “The real solution for restraining prices lies in raising property taxes.”
To be sure, second-quarter deals might have slowed due to an outbreak of COVID-19, which has infected about 13,500 people since the beginning of May and led to school suspensions and restrictions on public gatherings.
“The market was doing pretty well before the outbreak, but now we can’t take clients to open houses,” said Justine Chen, head of research at Evertrust Rehouse Co (永慶房屋). “Transactions may decline, but there’s not much room for prices to drop as developers grapple with rising raw material costs and a shortage of construction workers.”
Home prices rose 3.9 percent last year, while housing and commercial deals surged to the highest in seven years, according to the ministry.
New curbs on speculation came into effect on Thursday last week, regulating the sale of unfinished apartments and cracking down on short-term, tax-avoiding deals. The central bank also tightened mortgage loans for those with multiple properties, and for luxury homes and corporate buyers.
That is aimed at helping those shut out from the market — principally younger people and those with low incomes — amid widespread resentment at the concentration of wealth among older Taiwanese. About 78.1 percent of all properties, including residential and commercial, are owned by people aged 45 and older, according to ministry data.
Residential and office deals in the six largest cities surged 27.9 percent in April from a year earlier, according to the state-run news agency. That is even as the 23.5 million population has been declining by about 400 people a day this year.
“Though the population is falling, smaller families are creating new demands, such as for small and medium-sized apartments.” Chen said, adding that a cultural belief that “owning property is owning wealth” remains strong.
A 14-year-old, 34m2 apartment in Taipei’s central Xinyi District (信義) recently sold for NT$16 million (US$571,633), according to ministry data.
It might seem cheap compared with Hong Kong, the world’s most-expensive market, but an average family in Taipei would need to spend more than three-fifths of their salary on mortgage payments at current prices, the ministry said.
Nationwide, Taiwanese spend about 36.5 percent of their income servicing their home loans, with a ratio of less than 30 percent being seen as reasonable.
On June 17, the central bank said it was watching to see if recent measures stabilize prices, and that it was prepared to tweak policies if needed. It still held rates at a record low 1.125 percent, and banks have plenty of money to lend.
Measures to combat speculation would curb volumes, but ample liquidity would drive housing prices next year, said Andy Huang (黃舒衛), director at RePro Knight Frank.
“Low rates and highly accessible mortgages have lowered the barrier to buying homes,” Yang said. “If we can lift the third-level lockdown [level 3 COVID-19 alert] by July or August and have vaccines fully supplied, I believe that housing prices will continue to rise more quickly.”
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