A question from a lawmaker about his “personal experience” at a meeting of the Legislative Yuan’s Finance Committee prompted central bank Governor Yang Chin-long (楊金龍) to suggest that young people should consider renting a home until they can afford to purchase one.
There is nothing wrong with Yang’s advice, but in 1993, when Yang was a 40-year-old first-time home buyer, newly constructed houses in Taipei cost NT$300,000 per ping (3.3m2), while pre-owned houses were NT$200,000 per ping. Newly constructed houses in Taipei County — now New Taipei City — cost about NT$100,000 per ping.
At that time in Taiwan, the average family could expect an income of more than NT$70,000 per month, while the house-price-to-income ratio was consistently less than 10 times annual salary, global housing price indices show. Across the nation, the house-price-to-income ratio was about 4.86 times annual income, while in Taipei the figure was 8.03.
Today, the national house-price-to-income ratio is 9.07, while the ratio in Taipei is 15.79. In other words, a young person today will have twice as much difficulty buying a home than Yang did in 1993. Worse still, workers’ earnings have lost value in real terms over the past 16 years.
Realtors are fond of saying that housing prices in Taiwan are still lower than in Tokyo, Beijing, Shanghai, Hong Kong or Singapore, predicting that property values have room to rise further.
However, people in Japan, Singapore and Hong Kong have access to a large supply of government housing, which means that the house-price-to-income ratio in these areas is actually lower than in Taiwan.
Taiwan is experiencing a rebound in housing prices related to demand by real-estate investors and owner-occupier purchasers caused by loose monetary policies at a global level, as well as low interest rates and the return of Taiwanese businesspeople from China.
However, irrationally soaring housing prices have severely crowded out resources that could otherwise have been invested in more meaningful activities, while also harming consumer power in the real economy.
This situation limits Taiwan’s long-term economic development and competitiveness. Sky-high housing prices also exacerbate the national security problem of Taiwan’s declining birthrate.
To ensure a sound housing market, sustainable development and “residential justice,” the government should take measures to curb housing prices, and tackle the problem of investors and speculators. Action is required to prevent market imbalances from leading to market failure and, ultimately, a loss of popular support for the government.
Wei Shih-chang is an information technology engineer.
Translated by Edward Jones
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