Home prices in Taiwan jumped most in 6 years during Q1 2021. Taiwan prices defying multiple challenges.
Taiwan Home Prices on Hot Streak
Average home prices in Taiwan’s six main cities increased an overall average of +5.7 y/y, according to Taiwan’s Ministry of the Interior. Prices in the capital city of Taipei increased +4.9% y/y. Prices in Tainan surged +9.9% y/y.
Such home price jumps in Q1 2021 were the biggest price jumps the country has experienced in six years.
According to the state-run news agency, residential and commercial deals in Taiwan’s six largest cities jumped +27.9% y/y in April 2021.
Home Prices Rising Despite Almost Constant Challenges
Certainly pandemic-era housing markets everywhere in the world have been facing challenges but in many respects, Taiwan’s increasing housing prices could appear to be almost defiant.
Taiwan is now facing a constant threat of invasion by China. Its population is decreasing in size. More than one in ten homes is standing vacant. Workers in Taiwan have experienced decades of low wage-growth. Additionally, Taiwan has been experiencing an outbreak of COVID with lockdowns in place since the beginning of May.
Government Put Forth New Rules to Curb Speculation in Hopes of “Reining In” Prices
Across Taiwan, home prices rose +3.9% ub 2020 while simultaneously, both housing and commercial deals soared to the highest levels in seven years, according to the interior ministry.
The government just instituted new rules to curb speculation on the sale of unfinished apartments. The government also cracked down on short-term, tax-avoiding deals. In concert, the central bank tightened mortgage loans for buyers already having multiple properties, for luxury home buyers and for corporate buyers.
The central bank is also said to have measures that would help younger people and people with low incomes enter the market. However, we do not have any specifics about those measures.
Taiwan’s Current Housing Costs
Most recently, a 14-year-old 365 square foot apartment in Taipei’s central district sold for the equivalent of $573,000, according to the Ministry of the Interior. This price is consistent with the reality that an average family in Taipei spends more than three-fifths of their salary on mortgage payments.
Island-wide, Taiwanese spend approximately 36.5% of their income servicing their home loans.
For the moment, bank rates are at a record low of 1.125%.
Despite Falling Population, New Demand Coming from Smaller Families
According to Justine Chen, head of research at Yung Ching Realty, ”Though (Taiwan’s) population is falling (roughly -400 people/day in 2021), smaller families are creating new demands, such as for small- and medium-sized apartments.”
Chen also said that “…there’s not much room for prices to drop as developers grapple with rising raw material costs and a shortage of construction workers.”
Chen added that Taiwan’s cultural belief is that “owning property is owning wealth.”
The Future of Home Prices in Taiwan?
Yang Chung-hsien, an associate professor and real estate specialist at National Pingtung University, said, “The government is not bringing its ultimate game to fight the overly hot market. The real solution for restraining prices lies in raising property taxes…Low rates and highly accessible mortgages have lowered the barrier to buying homes (and) if we can lift the third-level (COVID) lockdown by July or August and have vaccines fully supplied, I believe that housing prices will continue to rise more quickly.”
Thanks to Bloomberg.
