A healthy housing market
With media reports that housing prices have rebounded, calls for stabilizing the housing market are again being heard.
The Chinese Association of Real Estate Brokers’ new chairman, Chang Shih-fang (張世芳), said that this wave of demand is due to ripe conditions in the overall real-estate environment, rather than speculation by brokers.
The increase in housing prices and the number of construction projects is “reasonable,” and this is not a good time for the government to curb prices, Chang said, calling on the government to respect the free market.
It cannot be denied that the rebound is mostly related to real-estate investment triggered by hot money and a low interest rate.
It is more difficult to understand why it is “reasonable” that prices remain so high.
The housing price-to-income ratio is a global index used to measure a family’s ability to purchase a home.
Most local and international experts believe that home prices are reasonable when a household can purchase a new 30 ping (about 100m2) home at five to seven times its annual income.
However, in Taiwan the ratio has surged from 4.4 times in 2002 to 8.62 times so far this year. As for Taipei, the figure surged from 5.8 times to 13.94 times during the same period.
Average annual household income in Taipei is about NT$1.6 million [US$55,409]. This means a hardworking family would only be able to afford a new 30 ping home at NT$800,000 per ping if they did not spend a single dollar on food, drinks or other things for the next 14 years.
Be it the 8.62 to 13.94 price-to-income ratio in Taiwan or the mortgage burden-to-income rate of 30 to 50 percent, these figures are high in comparison to the rest of the world.
There is no doubt that housing prices in Taiwan are too high, and it makes sense that the government should take action to make the housing market a little “healthier.”
As housing prices continue to rise, the threshold for young people to buy a home is out of reach, making many of them despair about their future. This is bad for the nation’s long-term economic development and competitiveness.
Besides, the high housing prices have made Taiwan’s low birthrate — a “national security issue” — even worse, which could result in a vicious economic circle.
Wei Shih-chang
Yilan County
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