The government recently announced several policies to address public concern about the affordability of housing, although the timing of those announcements was suspicious, given that it came just ahead of yesterday’s special municipality elections.
Curbing housing prices remains one of the government’s top priorities, in addition to creating more jobs and boosting household income.
As concern increases over the seemingly overheating property market — especially in Taipei, where the swelling prices of luxury residences has fueled a hike in housing prices throughout the city — the central bank has demanded that lenders tighten their mortgage lending practices, while the Ministry of Finance has suspended public land sales to ward off speculative investment in the property market.
On Nov. 15, the government announced that it would build 1,661 community housing units on five plots of state-owned land in Taipei City and county. This came after an announcement in March that it would build 4,000 units near the Taiwan Taoyuan International Airport MRT system’s Linkou station in Taipei County.
Moreover, on Wednesday it announced it would work with state banks to offer a NT$200 billion (US$6.55 billion) preferential mortgage program for first-time homebuyers between the ages of 20 and 45. Then on Thursday, the government came up with a four-year NT$18.4 billion urban renewal program that it claimed would boost the economy and create jobs.
The government’s solution to the housing problem focuses on building more houses, ignoring the fact that there are still many empty houses, new and old.
Efforts to provide would-be home buyers with low-interest rate mortgages may end up encouraging developers to build even more houses. Indeed, government policy has focused more on the number of houses and less on the absurdly high prices that people are paying in Taipei.
The latest government figures released on Friday showed that the property market continues to show signs of growth, suggesting that property speculation remains strong in Taipei and possibly showing signs of a potential bubble in the making.
According to the latest central bank data, outstanding loans for home purchases rose for the 20th straight month to a record NT$5.09 trillion last month, up 0.4 percent from the previous month and compared with a 0.22 percent increase in September. Loans to construction companies also expanded for the ninth straight month to a decade-high of NT$1.23 trillion last month, although the monthly growth rate has narrowed to 1.04 percent last month from 3.18 percent in September.
The NT$5.09 trillion in housing loans accounts for 37.65 percent of GDP, which economists at the Taiwan Institute of Economic Research have said could lead to a bubble if the ratio continues to climb and hits the critical level of 40 percent.
Indeed, the ratio actually reached 42.81 percent last month if we include the NT$690 billion in housing repair loans and it could shoot even higher after the government’s preferential mortgage program takes effect on Thursday.
Building more houses is not enough to deal with the housing problem, as the key issue is that prices are too high in certain areas. After the dust settles from the elections, the government must address this issue with more effective measures and a comprehensive review of the nation’s regional development plans.
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