President Ma Ying-jeou’s (馬英九) government has a dream for all of us in Taiwan — a big China dream that heralds a cross-strait common market and jumps to the conclusion that the local economy will surely benefit from cooperation with Beijing.
However, the reality is that most of the nation’s middle-income earners and financially disadvantaged groups have been suffering from price hikes of more than 20 percent as a result of the anticipated closer ties with China, all in the midst of years of flattened salary growth.
Skyrocketing property prices, especially in Taipei, are a good example of the speculation going on as investors anticipate the economic deal.
So no one should blame Premier Wu Den-yih (吳敦義) for his unilateral yet well-intended decision to halt auctions of government-owned land in Taipei by the National Property Administration under the Ministry of Finance.
It appears the government is the victim of bad timing and is in a catch-22 situation. The sale of public land has led some to accuse the government of fueling the nation’s growing property bubbles and for competing with the private sector for quick gains from Taipei’s overheating real-estate market.
Nevertheless, as several realtors and land developers have warned, the premier’s decision to cease the sales may backfire. It could squeeze the city’s already tight supply of land and push land prices even higher.
Also, if not now, when should the government put its public land — at an estimated market value of NT$2 trillion (US$62.5 billion) — back on the agenda again?
Taiwan has come a long way and reached a consensus on liberalizing the use of public land, which used to sit idle under various government agencies. The government has been heavily criticized for being the nation’s “biggest landlord.”
If the China deal does work out as the Ma government hopes and provides a big boost to the local economy, domestic property prices are sure to climb. That would be an even worse time for the government to release any land because it will be further accused of merely seeking to maximize returns. To avoid such accusations, the government could completely cease selling land.
Another scenario is that the China deal may not work out quite as the Ma government has planned.
More and more analysts have begun to realize that the effect of the planned economic cooperation framework agreement (ECFA) with China may be exaggerated and, even though the government has concentrated all its efforts in pushing for the deal, it will not provide a long-term driver for the local market.
Just yesterday, William Dong (董成康), a managing director of UBS Securities, said that “the ECFA will only put Taiwan on an equal footing with its regional trading partners, but will not provide a significant boost to [Taiwan’s] GDP growth.”
If that holds true, it will be a wake-up call for many, whether they are in the property market or not.
It will be another example of the government shooting itself in the foot by not having thought through the consequences of putting all its eggs in the China basket.
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