High school teacher I-Chung Huang said he’s hunted in vain for a home in Taipei’s soaring market for four years, convinced that owning an apartment could help him find a wife.
“Renting is fine when you’re young, but I’m in my 30s and I have a stable income,” said Huang, who earns NT$80,000 ($2,669) a month teaching civics and writing textbooks. “I didn’t understand it then, but I do now. Taipei’s apartments aren’t for living, they’re for selling.”
First-time buyers like Huang have been shut out of the market after home prices in Taipei almost tripled in the past 10 years, spurred by low mortgage rates. With local elections in November, Taiwan’s ruling political party has put access to housing near the top of its agenda. President Ma Ying-jeou has proposed building more affordable housing, and increasing taxes for non-owner-occupied homes to curb speculators.
“It’s a consensus that young people can’t afford to buy a home,” said Stanley Su, an analyst at Sinyi Realty Co. (9940), Taiwan’s only listed real estate broker. “The ruling party must respond to these concerns, and the opposition will have its own ideas, so inevitably there will be policy speculation. The property market will cool.”
Taipei sits at the northern tip of Taiwan, an island off China’s southeast coast that the world’s second-largest economy claims as its territory. The bustling, dense capital city is a mix of old, low-rise buildings and modern office towers, including Taipei 101, the world’s third-tallest building. The population of Taipei and New Taipei City, a municipality surrounding the capital, has grown to 6.64 million.
Taiwan’s housing market surged after the government relaxed rules that prompted locals to repatriate more income from mainland China, and the central bank lowered borrowing costs to buoy the economy. It grew an average 3.3 percent annually since the 2008 financial crisis, compared with 4.6 percent in the previous five years.
As bond yields and deposit rates tumbled, Taiwanese who had accumulated wealth during the 1990s technology boom poured their savings into real estate, driving up prices.
Record low mortgage rates have also spurred housing gains. The average rate in Taiwan fell 51 basis points, or 0.51 percentage point, over the past decade to 1.96 percent in April, according to central bank data going back to 1994. Rates reached an all-time low of 1.62 percent in 2010. They have been below 2 percent since February 2009.
Taiwan’s central bank will hold its benchmark discount rate on 10-day loans at 1.875 percent for a record 12th quarter at its June 26 meeting, according to the median estimate in a Bloomberg survey of analysts. The central bank may raise the rate to 2 percent in the fourth quarter, the survey showed.
As quarterly economic growth slowed in the first three months of the year, hurt by weaker demand for exports, the housing market also began to cool. Transaction volumes declined 14 percent to 8,214 compared with the previous period, while Taipei’s property prices slipped 1.3 percent, according to Sinyi Realty.
The average price for a residential unit in Taipei was about NT$22.2 million ($740,617) at the end of March, according to Sinyi Realty. The average size was 32.6 ping (1,174 square feet).
In 2012, the central bank moved to damp prices. Central bank Governor Perng Fai-nan capped mortgages at 60 percent of the value of properties in Taipei and New Taipei City worth more than NT$80 million, and NT$50 million in other parts of Taiwan.
Perng also ordered banks last year to exercise discipline in extending mortgages. Taiwan’s five-biggest banks made an average NT$45 billion of housing loans each month last year, compared with NT$44.9 billion per month in 2012 and NT$19.8 billion a month in 2003, according to central bank data.
Taiwan’s legislature took action last month to deter speculation, raising the maximum property tax rate on non-owner-occupied homes to 3.6 percent from 2 percent.
“The government has created an atmosphere of higher taxes and tighter lending, but those with real estate in their hands don’t need cash, so prices won’t immediately crash,” said Cliff So, executive director at REPro Knight Frank in Taipei, the London-based broker’s local partnership. “The government may be aiming at a gradual downward adjustment in prices, since a sharp one will do no good to the property market or the economy.”
At Elite One, a planned residential complex in Wenshan, a district surrounded by mountains at Taipei’s southern end, apartments are being offered for as much as NT$950,000 per ping, or $880 per square foot. On a recent Saturday, prospective buyers were entertained by live jazz, lectured on healthy eating, and offered a French meal in a makeshift building that doubled as a sales office on the vacant land where construction will begin in July.
About 70 percent of the apartments have been sold, said Dennis Pan, a manager at Jaysanlyn Construction Co., which was commissioned to market the development.
“The real demand is still there,” Pan said, speaking in the lobby of the temporary building that houses sample units. “But investors are hesitant now because of government policy. Elections are coming up, and the number one complaint is the property market.”
President Ma’s approval rating has plummeted since he was elected to his second term in 2012. Driving down property prices is one of Ma’s priorities as his party, the Kuomintang, gears up for November’s polls. Voters will pick mayors, city council members and other municipal officials.
Ma vowed upon his sixth anniversary in office last month to create 10,800 rental units in the next three years and about 11,000 homes to be sold at below market prices.
Finance Minister Chang Sheng-ford said last month the government may “strengthen” property taxes and expand the tax base with a focus on luxury developments.
“Taipei’s property market is starting to gradually dip, and the momentum to rise further has weakened,” he said at a media briefing in Taipei.
Foreign investors account for a small portion of Taiwan’s housing market, unlike in London or Hong Kong, said REPro Knight Frank’s So. He attributed the property market’s surge to more funds coming back onto the island from China and a cut in estate taxes.
In 2008, the government relaxed a quota for Taiwanese companies investing in China, and businessmen that may have transferred their funds covertly to the mainland were able to bring the money back to Taiwan. A year later, the government lowered estate taxes from a top marginal rate of 50 percent to a flat 10 percent rate.
“Taiwan’s fixed-income rates are low and you can’t buy that many stocks, so a lot of money was put into real estate,” said So.
Home prices have jumped so much that Huang, even with a monthly salary from teaching that’s twice Taiwan’s average, can’t compete with rival bidders. He lost out when his NT$500,000-per-ping offer for a 15-ping, one-bedroom unit in Zhongshan district was trumped by a NT$550,000 bid. Huang thought the apartment would be cheaper as the building was about 20 years old, he said.
Huang, 36, founded a group early this year to fight for affordable housing, emboldened by students who staged a 24-day occupation of the legislature. They were concerned that a trade deal with China would give it greater control over Taiwan. The legislative speaker relented, suspending the trade pact’s review.
The student protests have bolstered activism for affordable housing, Huang said. His organization, the Taiwan Adequate Housing Association, educates people about housing policies and lobbies lawmakers and government officials. In October, it plans to stage an overnight sleep-in next to a luxury development in Taipei to protest rising property prices.
“Taiwan’s young people have learned one thing recently: If we fight, there’s a chance of things changing,” said Huang, who is still looking for a bride. “But I’m going to try to persuade my next girlfriend to accept that I may rent and not buy an apartment for now.”
To contact the reporter on this story: Justina Lee in Taipei at email@example.com