The central bank’s credit control measures are cooling the housing market, as seen in a moderation of transactions, a shift in market sentiment and an increased ratio of first-home buyers.
The bank’s observations were detailed in a report it yesterday released to the legislature’s Finance Committee.
Speculative demand has weakened, leading to a slowdown in housing transactions, it said, adding that property transfers in July last year soared 31.8 percent year-on-year, but shrank 11.7 percent in December.
Photo: CNA
Similarly, mortgages rose 11 percent in August last year, but mitigated to 10.4 percent in December, despite a high sales season, it said.
Expectations for increases in home prices have tapered off, the bank said, citing a Cathay Financial Holdings Co (國泰金控) survey that showed home-purchasing interest fell 14 percentage points in the second half of last year.
The business confidence reading compiled by the Taiwan Institute of Economic Research (台經院) fell to 44.2 percent among domestic construction firms and property brokers, suggesting a gloomy outlook, it said.
Meanwhile, the proportion of first-home buyers rose to 61.4 percent in December last year, up from 57 percent in January 2023, as lenders prioritized transactions with borrowers with real housing demand, the bank said.
The Cabinet has pressed the central bank to leave first-home purchases unaffected in its bid to guide money away from real-estate lending that approached a record in August last year, fueling bubble concerns.
That prompted the central bank to introduce expansive credit controls the next month, lowering the loan-to-value ratios for non-first home purchases across Taiwan. A cash crunch followed and interest rates picked up noticeably.
The central bank said it conducted 160 inspections in the past five years of financial institutions, including banks, credit cooperatives, life insurance companies, bills finance companies and farmers’ associations, over their mortgage operations and land financing to rein in reckless lending.
Toward that aim, the central bank said it focused on issues such as the concentration of real-estate loans, mortgage interest rate pricing, lagged land development, and the reasons behind the delays. It has demanded corrections to maintain the financial system’s stability and health.
The bank said it would step up inspections this year to ensure lenders carry out their own proposed measures to help bring down real-estate lending.
It would also continue monitoring the housing market and adopt tightening measures, if necessary, it added.
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