Taipei Home Prices to Gain Even as Interest Rates Increase, Citigroup Says
Taipei’s home prices will rise for an eighth consecutive year as a rebounding economy and overseas fund inflows outweigh government efforts to rein in values, Citigroup Inc. said.
The average home price will increase by 7 percent to 10 percent this year in Taiwan’s capital, while prices in the surrounding areas will climb by 10 percent to 15 percent, Citigroup analyst Dave Chiou said in a telephone interview in Taipei. Property prices in the capital advanced 12.2 percent last year to a record, he said.
“We know the central bank will continue its tightening cycle this year, but the housing market isn’t likely to see a correction unless the key rate is higher than 3.5 percent,” Chiou said. “Money repatriation and capital inflow will continue to drive up prices.”
The island’s central bank raised the benchmark interest rate on Dec. 30 by 0.125 percentage point to 1.625 percent amid concerns that a housing bubble is forming, citing a falling jobless rate and rising salaries as reasons for the increase.
Policy makers also increased the reserve requirement on some local-currency deposits by foreigners to as much as 90 percent, stepping up measures to counter capital inflows.
The Central Bank of the Republic of China (Taiwan) will raise rates by 0.125 percentage point at each quarterly policy meeting in 2011, to 2.125 percent, according to Citigroup’s forecast.
To contact the reporter on this story: Chinmei Sung in Taipei at csung4@bloomberg.net
To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net
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