Taipei’s rising house prices stymie search for bride

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 (RM8,587) 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, Taiwan’s only listed real-estate broker.

Taipei, a 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% annually since the 2008 financial crisis, compared with 4.6% 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. Rates reached an all-time low of 1.62% in 2010. They have been below 2% since February 2009.

Taiwan’s central bank will hold its benchmark discount rate on 10-day loans at 1.875% for a record 12th quarter at its meeting on Thursday, according to the median estimate in a Bloomberg survey of analysts. The central bank may raise the rate to 2% 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 — Taipei’s property prices slipped 1.3%, according to Sinyi Realty.

The average price for a residential unit in Taipei was about NT$22.2 million at the end of March, according to Sinyi Realty. The average size was 32.6 ping (1,174 sq ft).

In 2012, the central bank moved to damp prices. Central bank governor Perng Fai-nan capped mortgages at 60% 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 legislature took action last month to deter speculation, raising the maximum property tax rate on non-owner- occupied homes to 3.6% from 2%.

“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.

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 US$880 (RM2,825) per sq ft.

About 70% 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.”

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.

“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.

Huang, 36, founded a group, Taiwan Adequate Housing Association, early this year to fight for affordable housing, emboldened by students who staged a 24-day occupation of the legislature.

“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.” — Bloomberg View

Residential and commercial buildings rise out of the skyline in this elevated view of Taipei, Taiwan.

This article first appeared in The Edge Financial Daily, on June 24, 2014.