The national average house prices soared by 8.2% y-o-y to Q2 2011, according to Sinyi Realty, Taiwan’s biggest real estate brokerage. On a quarterly basis, house prices rose by 3% over the same period.
House prices in all areas have increased:
• Taichung had the biggest house price increase of 19.7% y-o-y to Q2 2011. But house prices rose by just 1.6% in the second quarter.
• In Kaoshsiung, house prices rose by 16.5% during the year to end-Q2 2011 and by 2.1% in Q2.
• House prices in New Taipei rose by 15.4% in the year to Q2 2011. However, New Taipei recorded the lowest quarterly price increase among all regions in Q2, of 1.1%.
• In Taipei, house prices rose by 14.2% y-o-y to Q2 2011. Taipei had the highest Q2 increase, at of3.1% .
The ongoing boom is a result of Taiwan’s improved relationship with China, low interest rates and increased credit availability.
As the property market has heated up, the Central Bank of China (CBC) has implemented prudential measures to curb bank real estate lending.
A strict enforcement of a 70% loan-to-value (LTV) ratio for all new lending began in June 2010. Then in June 2011, a luxury tax was implemented in Taiwan. Property not used as a primary residence by the owner, and sold within two years will be levied a 10%-15% tax. However, property demand is still expected to remain strong despite government curbs, because of very strong economic growth.The central bank is expected to raise the key interest rate to 1% by the end of this year from just 0.125%. Mortgage rates, which stood between 1.7% and 1.8%, are also projected to rise this year, according to local property experts.
In May 2011, total mortgage loans increased by 4.55% y-o-y to NT$5,237 billion (US$178.9 billion), according to the DTZ Research-Taipei. Meanwhile, the total amount of construction loans rose by 19.07% y-o-y to reach NT$1,349 billion (US$46.1 billion).
Analysis of Taiwan Residential Property Market »
The owner of an apartment in Taipei will be lucky to realize 2% yields, except on the very smallest apartments. Given that the Global Property Guide’s figures are for gross rental yields, i.e., do not make any allowance for vacant periods, for legal costs, administration costs, cleaning and repairs, rental taxes, property taxes, and other taxes, it is safe to say that landlords in Taiwan earn nothing on their apartments.
We believe apartments in Taipei are overvalued - and will fall in price. But we should warn readers that we can get it wrong!
Capital Gains: Capital gains realized by nonresidents are treated as regular income, and are taxed at the personal tax rate of 20%.
Inheritance: Estate duty is levied at 10%.
Residents: Residents are taxed on their income from Taiwanese sources at progressive rates, from 5% to 40%.
If the tenancy laws were properly followed, Taiwan could be regarded as pro-tenant.Rent Control: There is rent-control, and tenants have security of tenure. However, most landlords catering to the low income segment do not follow the law.
However, those who cater to the expatriate and high income market have no choice but to follow the law. To avoid the legal disadvantages, most high-end apartments rent as serviced apartments.
In July 2010, Taiwan and China co-signed the Economic Co-operation Framework Agreement (ECFA) reducing tariffs and trade barriers between the two countries. The agreement is expected to expand Taiwan’s GDP by about 4.5%, or US$21 billion in 2011, according to the Peterson Institute for International Economics.
Consistent with the goals of the ECFA, the International Monetary Fund (IMF) has recently elevated its GDP growth forecast for Taiwan from 6.5% in April to 7.7% in July 2011. The rosy outlook was attributed to the rising local and foreign investments.
Stronger ties between Taiwan and China began when President Ma Ying-Jeou of the Kuomintang Party took office in May 2008. He vowed greater cooperation with mainland China and denounced independence for Taiwan, a sharp contrast to his predecessor, Chen Shui-bian.
In his inaugural address, Ma promised “no independence, no reunification and no war” during his presidency. Since 2009, several memorandums of agreement between Taiwan and China on financial cooperation have been signed. These symbolic gestures reassured both investors and homebuyers alike.
Taiwan’s seasonally-adjusted unemployment rate has been improving for 18 months in a row, and stood aat 4.6% in February 2011, according to Asia Monitor. However, economists predict a slight increase in the unemployment rate to 4.7% at end-2011 given the Japan earthquake.
In 2010, the country’s unemployment rate was 5.21%
In 2011, the government raised its inflation forecast to 2.18% from the previous 2%. In 2010, Taiwan’s inflation rate was just 0.96%.
To tame inflationary pressures, Taiwan raised its benchmark interest rate by 12.5 basis points in March 2011, to 1.75%.
RSS
Global Property Guide on Twitter
Global Property Guide on Facebook
Global Property Guide on Linked In