Market in Depth

Both demand and supply continue to rise

Lalaine C. Delmendo | August 25, 2021

Taiwan's house prices are surging again, buoyed by a strong economy and ultra-low interest rate environment.

Taiwan's Lutheran home price index rose by 10.8% (9.4% inflation-adjusted) during the year to Q1 2021, a sharp improvement from the previous year's 2.7% increase and the biggest y-o-y growth in seven years, according to Sinyi Real Estate Planning and Research. Quarter-on-quarter, nationwide house prices increased 4.3% (4% inflation-adjusted) in Q1 2021.

In Taipei, the capital, house prices were up 9.2% (7.8% inflation-adjusted) during the year to Q1 2021, in contrast to a 0.1% fall in the previous year. It was the capital city's best performance since Q4 2013. On a quarterly basis, house prices in Taipei increased 2.5% (2.2% inflation-adjusted) during the latest quarter.

All of the country's other major cities saw strong house price rises during the year to Q1 2021.
  • Xinbei house prices rose by 9.5% (8.1% inflation-adjusted) y-o-y in Q1 2021, up from the prior year's 2.9% rise and its strongest performance since Q1 2014.
  • Taoyuan house prices rose strongly by 11% (9.6% inflation-adjusted), following a modest 2.1% y-o-y growth in Q1 2020. It is also the city's biggest annual increase in seven years.
  • Hsinchu house prices surged 14.2% (12.8% inflation-adjusted) y-o-y in Q1 2021 – sharply up from the previous year's 5.5% rise and its biggest annual expansion since Q2 2012.
  • Taichung house prices rose strongly by 10.7% (9.4% inflation-adjusted), the biggest growth since Q1 2014.
  • Kaohsiung house prices increased 10.4% (9% inflation-adjusted), up from a y-o-y rise of just 1% in Q1 2020 and its best showing in seven years.

Both demand and supply continue to rise, despite the pandemic. In the first four months of 2021, housing transactions in Taiwan's six major cities rose by 19.3% y-o-y to 84,677 units, with Kaohsiung registering the highest growth of 24.7%. During 2020, housing transactions were estimated to have reached 250,000 units – the highest level in six years.

In the first ten months of 2020, the latest figures available from the Ministry of Interior, the total number of residential construction licenses issued rose by 7.7% y-o-y to 129,365 units, following strong growth of 22.1% in 2019 and 32.3% in 2018.

Despite the recent efforts by the government to prevent speculative buying, demand will continue to rise this year supported by the strong economy, as well as ultra-low interest rates.

“Investment activity is expected to be robust in 2021 amid abundant liquidity, the low cost of borrowing and strong demand from owner-occupiers,” said CBRE.


Taiwan's economy grew strongly by 8.92% y-o-y in Q1 2021 – the fastest pace in over 10 years, thanks to a surge in exports amid strong foreign demand for electronic parts and tech products. Clearly, the economic repercussions of the COVID-19 outbreak in Taiwan have been relatively milder than in neighbouring countries, with the Taiwanese economy still growing by 3.1% in 2020.

Recently, the Directorate General of Budget, Accounting and Statistics (DGBAS) upgraded its economic forecast this year to 5.46%, from its initial projection of 4.64%. If realized, it would be the fastest growth in eleven years.


Analysis of Taiwan Residential Property Market »

Rental Yields

Taiwan’s unhappy property owners

Taipei now vies with Monaco for having the lowest yields in the world. With buying prices per square metre averaging a steller US$7,200 to US$9,200, depending on size, and rents still affordable (where else can you rent a US$1.8 million home for just US$2,200 per month?), Taipei is not a happy place for landlords.

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!

Read Rental Yields »

Taxes and Costs

Rental income tax is high in Taiwan

Rental Income: The gross income of nonresidents is taxable at 20% with no exemptions or deductions allowed.

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 45%.

Read Taxes and Costs »

Buying Guide

Buying costs are moderate in Taiwan

The total roundtrip cost of buying and selling a dwelling is around 10.26% - 13.3% of the property's value, including the real estate agent's 4% - 6% fee, which is shared by the buyer (1% -2%) and the seller (3% - 4%). To register the property requires three procedures, which can be completed in about five days.

Read Buying Guide »

Landlord and Tenant

Pro-tenant laws lead to avoidance

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.

Read Landlord and Tenant »

ECONOMIC GROWTH

Taiwanese economy remains resilient

Taiwan’s economy grew strongly by 8.92% y-o-y in Q1 2021 – the fastest pace in over 10 years, thanks to a surge in exports amid strong foreign demand for electronic parts and tech products. Clearly, the economic repercussions of the COVID-19 outbreak in Taiwan is relatively milder than in neighbouring countries, with the Taiwanese economy still growing by 3.1% in 2020.

Recently, the Directorate General of Budget, Accounting and Statistics (DGBAS) upgraded its economic forecast this year to 5.46%, from its initial projection of 4.64%. If realized, it would be the fastest growth in eleven years.

Taiwan unemployment rate
Exports, which account for about 60% of the country’s GDP, are now expected to grow by 15.44% in 2021. In the first four months of 2021, Taiwan’s exports rose by a huge 28% from a year earlier to US$132.91 billion, and imports increased 22.4% to US$112.36 billion. As a result, it recorded a trade surplus of US$20.55 billion over the same period – up almost 71% from a year earlier.

Taiwan, heavily dependent on exports, was seriously affected by the US economic recession in 2008. The economy bounced back in 2010 with spectacular growth of 10.6%. From 2011 to 2019 the Taiwanese economy has grown by an annual average of 2.8%.

Consumer prices rose by 2.48% y-o-y in May 2021, the highest inflation rate since February 2013, mainly driven by a rise in transportation costs, according to the National Statistics.

In April 2021, unemployment rate stood at 3.64%, down from 4.03% a year earlier, as the labour market returns to pre-pandemic levels.

Tsai Ing-wen’s reelection widens China-Taiwan divide further
In the January 2020 presidential elections, Tsai Ing-wen of the independence-leaning Democratic Progressive Party (DPP) won her second term in office, after defeating her major challenger Han Kuo-yu of the mainland-friendly Kuomintang by close to 3 million votes.

The conflict between Mainland China and Taiwan started to escalate four years ago when Tsai assumed office and became Taiwan’s first female president. One of Tsai’s key economic policies is to reduce Taiwan’s reliance on Mainland China, which accounts for around 40% of the island’s exports. Tsai plans to form closer ties with the ASEAN.

Mainland China is highly suspicious of Tsai, warning her against any attempt at a formal breakaway. Early in 2016, the Chinese government announced that it had cut off official contact with Taipei. In December 2016, Taiwan sent a blunt message to China by preparing its military forces and stepping up its training exercises to fend off Beijing’s threats.

Taiwan gdp inflation
Taiwan’s relations with China reached a new low after China decided to boycott the Olympic-style sporting event, 2017 Summer Universiade, which was held in Taipei in August 2017.

In June 2018, the construction of a US$250 million complex that will house the new American Institute in Taiwan (AIT), which serves as the United States’ de facto embassy in Taipei, escalated further the tensions between Taiwan and Mainland China.

In July 2019, the US announced of its intent to sell 108 M1A2T Abram tanks and Stinger missiles worth US$2.2 billion to Taiwan, despite China’s demand to cancel the said sale. The weapons deal is a signal to China of US commitment to Taiwan. As an expression of outrage, China recently said that it would impose sanctions on US firms involved in the weapons sale, as it harmed China’s sovereignty and national security.

In September 2019, both Solomon Islands and Kiribati severed ties with Taiwan and officially recognized Beijing, amidst the latter’s assurance of providing development assistance to these small countries. Seven diplomatic allies have cut ties with Taiwan since Tsai came to office, including Burkina Faso, Dominican Republic, Sao Tome and Principe, and Panama.

“China stealing our allies, pressuring our international space won’t shrink the distance across the strait and won’t allow for peaceful, friendly development of cross-strait relations,” said Taiwan’s foreign minister Joseph Wu.


Taiwan now has only 15 diplomatic allies left.

China’s campaign to isolate Taiwan extends to minute details. In the past two years, Beijing has been sending warning to airlines to list “Taiwan, China”, rather than just “Taiwan”, on their websites. The move seems to be working - The Associated Press has found that about 20 carriers, including Air Canada, British Airways, and Lufthansa, now refer to Taiwan as a part of China on their websites. In addition, China fined a Japanese clothing company for listing Taiwan as the “country of origin” on packaging.

Since last year, China has also ramped up military pressure on Taiwan through repeated incursions into the latter’s airspace. Ironically despite rising tensions, Taiwan’s trade shipments to mainland China surged to a record US$151.5 billion in 2020 – up 14.6% from a year earlier. It accounted for almost 44% of Taiwan’s total exports last year, the highest since Tsai became president in 2016.

In a move to curb Taiwan’s economic reliance on mainland China and forge a free trade agreement with the US, Tsai has recently lifted a long-standing import ban against US pork, despite significant public pushback. In addition, Tsai also aims to join the 11-country trade pact Comprehensive and Progressive Agreement for Trans-Pacific Partnership to strengthen Taiwan’s economic ties with other nations.

Relations between Mainland China and Taiwan thawed when President Ma of the Kuomintang Party (KMT) assumed office in May 2008. He vowed greater cooperation with Mainland China and denounced independence for Taiwan, a sharp contrast to his nationalist but corrupt predecessor, Chen Shui-bian. In November 2009, several memorandums of agreement between Taiwan and China on financial cooperation were signed. These gestures reassured investors and home buyers alike. In June 2010, an Economic Cooperation Framework Agreement (ECFA) was signed by Taiwan and China. President Ma also accepted the 1992 consensus, which played a crucial role in lowering tensions with China and boosting cross-strait economic ties.
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