The central bank yesterday further tightened credit controls for mortgage operations, cutting the loan-to-value (LTV) ratio by 10 percentage points amid a surge in home loans over the past three months, which raised overconcentration risks.
However, the bank left its policy rates unchanged, even though it substantially revised upward its forecast for Taiwan’s GDP growth this year from 3.68 percent to 4.53 percent.
“The board decided to lower the LTV limit to 40 percent for all corporate buyers and 50 percent for multiple-home owners, to rein in house hoarding and property price hikes,” central bank Governor Yang Chin-long (楊金龍) told a media briefing after a quarterly board meeting in Taipei.
Photo: CNA
Mortgage lending in January jumped 9.17 percent from a year earlier to NT$8.11 trillion (US$286.51 billion), while construction and land financing soared 18.7 percent to NT$2.5 trillion, the steepest increases since October 2006 and July 2011 respectively, central bank data showed.
The latest credit controls aim to stem property speculation by highly leveraged borrowers, but would not affect people with real demand or urban renewal projects, Yang said.
No grace period was allowed.
Concerted efforts by government agencies are intended to induce a soft landing for the local property market, he said.
The Ministry of Finance is pushing property tax revisions that would impose punitive levies of 45 percent on homes resold within five years of purchase, up from two years.
It is better to act before expectations of property price hikes take root, Yang said, singling out people and companies that own more than four properties as the main target of the strictest credit controls.
As of last year, more than 13,000 companies and 80,938 individuals met the threshold, together owning about 14 percent of homes in Taiwan, Ministry of the Interior data showed.
Most companies resell such properties one year after purchase, the data showed.
Yang said that he has no intention of raising interest rates, because such moves would affect other sectors and attract global capital when major central banks are printing money.
While the world looks on course to emerge from the COVID-19 pandemic, uncertainty abounds, he said, adding that related relief loans would not expire until June this year.
The central bank has lowered the lending cap for luxury housing from 60 percent to 55 percent, and is to enforce a 55 percent limit on loans for industrial plots of land that was previously only recommended.
Luxury housing prices tend to be more volatile in times of corrections, Yang said.
Mild inflation in Taiwan gives the central bank room to stick with its accommodative monetary policy, he said.
The central bank said that the consumer price index is expected to rise 1.07 percent and the core reading to edge up 0.77 percent.
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