Taipei Mayor Ko Wen-je (柯文哲) has sparked fresh controversy by saying that he was against depressing the housing market, leading many to accuse him of backpedaling on his housing policies, but he has a point when he says that bringing down housing prices would have grave consequences.
First of all, while prospective buyers in Taipei say that housing prices have risen steeply over the years and need to be adjusted downward, more than 70 percent of Taipei residents who already own a house disagree.
With costs rising much faster than housing prices, it would have been amazing if housing prices had remained on the same level they were three years ago. As commodity prices rise, so do the costs of building homes, and it is only natural that the housing market reflects these hikes.
With everything costing more these days, it would be unfair to the majority of Taipei residents who own houses if real-estate prices were forced down, as it would make them suffer considerable financial losses.
A downward adjustment would also defeat the government’s role as facilitator to help people buy houses at more reasonable prices, as homeowners would be less likely to put their properties up for sale. Conversely, it would only make them cling tighter to their properties and wait for prices to rebound, thus creating a holdup in the market.
Also at risk are construction companies, who would be forced to sell homes at prices lower than what they had expected to earn.
Both situations would hurt housing liquidity, leading to a potential holdup in the market and, in a worst-case scenario, contribute to a collapse of the banking sector.
As witnessed in the later stages of the US subprime mortgage crisis almost 10 years ago, a sharp decline in prices would tempt borrowers to default on their mortgage-backed securities due to negative equity, which occurs when the value of the houses they mortgaged falls to less than what they owe to the banks.
If real-estate prices are examined from a broader perspective, it is obvious that Taipei is not the only city with expensive properties, as it is the norm in all advanced cities worldwide.
As the city that boasts the most job opportunities and the most abundant resources, Taipei has a far higher demand for homes than any other city in the nation, and prices always increase when supplies are strained.
Even if the situation called for the government to take measures to prevent the real-estate bubble from bursting, it would need to be carried out in a gradual process that prevents a slump in the housing market.
The best way to bring down Taipei’s housing prices would be to boost the development of industries in other cities to make for a more even distribution of resources, which would be a time-consuming effort.
That said, there is still a glimmer of hope for young people who wish to live comfortably in Taipei.
Ko has pledged to build 50,000 public housing units for Taipei residents in eight years and Democratic Progressive Party presidential candidate Tsai Ing-wen (蔡英文) has promised to build 200,000 units nationwide.
If the two can make good on their promises, young people who live in appalling dwellings, such as illegally built rooftop additions or cramped rooms divided from a home, would be able to live in high-quality homes for several years on rents that are equivalent to or slightly higher than the market value, as they save up to buy their own property.
People who say that the government should make housing in Taipei available to all young people need to put things into perspective and realize that such a thing is unlikely to happen in the foreseeable future.
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