Taiwan’s property market is entering a freeze, with mortgage activity across the nation’s six largest cities plummeting in the first quarter, H&B Realty Co (住商不動產) said yesterday, citing mounting pressure on housing demand amid tighter lending rules and regulatory curbs.
Mortgage applications in Taipei, New Taipei City, Taoyuan, Taichung, Tainan and Kaohsiung totaled 28,078 from January to March, a sharp 36.3 percent decline from 44,082 in the same period last year, the nation’s largest real-estate brokerage by franchise said, citing data from the Joint Credit Information Center (JCIC, 聯徵中心).
“The simultaneous decline across all six cities reflects just how drastically the market has cooled since the central bank tightened credit controls in September last year,” H&B chief researcher Jessica Hsu (徐佳馨) said, referring to the 50 percent loan-to-value cap on second-home mortgages nationwide.
Photo: Hsu Yi-ping, Taipei Times
Tainan posted the steepest decline in mortgage activity, with applications plunging 52 percent to 2,110 cases, the JCIC data showed.
New Taipei City followed with a 44.3 percent drop, while applications in Taipei fell 40.4 percent. Taoyuan and Kaohsiung each recorded a 30.8 percent decline, while Taichung fared slightly better with a 25.3 percent decrease, the data showed.
In addition to shrinking mortgage applications, liquidity constraints at major Taiwanese banks are leading to delays and backlogs in home loan disbursements, creating a further drag on the housing market, Hsu said.
Banks have also been reducing loan-to-value (LTV) ratios to rein in real estate lending, which accounted for 36.9 percent of the system’s loans in April, the JCIC said.
LTV ratios declined in five of the six special municipalities, reflecting more conservative lending practices, Great Home Realty Co (大家房屋) researcher Lai Chih-chang (賴志昶) said.
Taipei recorded the largest cut, with the average LTV ratio falling from 71.7 percent to 68.6 percent — the lowest among the six municipalities and below the 70 percent threshold, Lai said.
Taipei’s high property prices mean that many transactions exceed the 30 percent loan-to-value cap applied to luxury homes valued at NT$70 million (NT$2.37 million) or more, he said.
As a result, loan sizes relative to property values are shrinking, especially as high-net-worth people continue to dominate the buyer pool, he added.
Taichung was the only city to buck the trend, with its LTV ratio edging up slightly from 72.7 percent to 72.8 percent, while the other cities saw moderate declines, Lai said.
The shift has caught many buyers off guard, as they have tended to focus on interest rate movements and underestimated the importance of down payment requirements, he said.
While lenders continue to support the government’s policy to promote first-home ownership, they have become more cautious in assessing mortgage applications and setting LTV ratios, Lai said.
With no signs of a policy shift from regulators or lenders, the housing market is likely to remain subdued in the near term, both Lai and Hsu said.
“A recovery will depend on when monetary and credit policies begin to loosen — an outcome that currently looks unlikely,” Lai said.
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