Markets

EDITORIAL: Hot housing market poses risks

Since final month, lecturers and market watchers have been discussing whether or not Taiwan’s housing market is overheating — a stark distinction to the chilly state of affairs within the first 5 months of the 12 months when the market was subdued by the COVID-19 pandemic.

Housing transactions within the nation’s six main municipalities final month rose 36 % year-on-year and 12 % month-on-month to 24,356 items, persevering with a steady restoration from the earlier two months and reaching a five-year excessive because of low rates of interest, ample market liquidity and the COVID-19 outbreak having been introduced below management.

The housing worth index compiled by Sinyi Realty Inc confirmed that the figures in Taoyuan, Hsinchu and Kaohsiung hit report highs within the April-to-June interval, whereas these in Taichung reached the second-highest on report. Figures in Taipei and New Taipei Metropolis rebounded to their 2015 highs.

Cathay Actual Property Growth Co’s newest survey additionally discovered that costs final quarter held resilient amid the COVID-19 pandemic and had been transferring near their historic excessive 5 years in the past.

As a consequence of low rates of interest and stronger market competitors, some lenders have even provided loans to potential homebuyers of as much as 90 % of a property’s worth, which solely provides gasoline to an already scorching state of affairs within the housing market.

Central financial institution Deputy Governor Chen Nan-kuang (陳南光) earlier this month in The Taiwan Banker journal wrote that the federal government ought to undertake “macro-prudential” measures earlier than the general public’s expectations of a pointy rise in housing costs take maintain. Chen additionally warned that the persevering with rise in housing costs wouldn’t assist financial restoration, however may result in extra critical misplacement of nationwide assets.

Moreover, Nationwide Taiwan College economics professors Wu Tsong-min (吳聰敏), Li Yi-ting (李怡庭) and Chen Shiu-sheng (陳旭昇) in a newspaper commentary on Oct. 4 referred to as on the central financial institution to obviously outline its standards for figuring out whether or not the market has overheated — a transfer they mentioned would assist the general public higher perceive the rationale behind changes within the financial institution’s selective credit score controls and permit individuals to have extra correct expectations for the housing market.

Minutes from the central financial institution’s previous three quarterly policymaking conferences certainly present that board members are divided over the problem of housing costs.

At a information convention following the central financial institution’s Sept. 17 quarterly board assembly, Governor Yang Chin-long (楊金龍) mentioned that the housing market has overheated solely in components of the nation.

Throughout a gathering of the legislature’s Finance Committee on Thursday final week, Yang once more performed down the chance and denied that the central financial institution plans to tighten credit score controls to rein in rising costs.

Nevertheless, housing transactions and costs have been growing over the previous few months, aided by Taiwanese firms getting back from China, worldwide know-how giants stepping up investments within the nation and land purchases by native builders and life insurance coverage firms, in response to a report issued by the central financial institution on the day earlier than Yang appeared earlier than the committee.

As world central banks have launched into aggressive financial easing to revive economies hit by the pandemic, the liquidity-driven rally in Taiwan’s housing market is prone to proceed for some time.

A booming property market isn’t fully a nasty factor for the economic system. Nevertheless, at a time when the actual economic system is being hammered by the pandemic, a continued rise in housing costs might result in many issues — corresponding to monetary instability, a widening wealth hole, housing injustice and useful resource misplacement — which couldn’t be addressed by a single ministry or authorities company.

The central financial institution can’t resolve these issues alone and it requires the coordinated efforts of assorted ministries and authorities companies.

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