Stocks better investment than realty: minister
By John Liu, The China Post
April 25, 2014, 12:00 am TWN
TAIPEI, Taiwan -- As real estate prices peak, stocks may serve as better investment, because they are likely to provide a better rate of return, Finance Minister Chang Sheng-ford (張盛和) said yesterday.
Chang went to the Legislature yesterday to report on the government's latest fiscal measures. The stock market dipped on its opening yesterday. Kuomintang (KMT) lawmaker Lu Shiow-yen (盧秀燕) questioned Chang if it had anything to do with the recent wave of protests against the nuclear power plant construction.
Chang said in response that the stock market is very sensitive to changes in the government's major policies, adding that every time there was a halt to the construction, the local stock market would take a hit.
The reason is that nuclear power plants are closely tied to domestic energy supply and economic development, Chang explained.
When asked if the stock market will reach 9,000 points, Chang said that he is confident on the fundamentals of the local economy.
Give Up Real Estate for Stocks
Lawmaker Lai Shyh-bao (賴士葆) asked if the government intends to introduce capital from the real estate market to the stock market in light of the fact that it has recently rolled out various measures to suppress surging housing prices.
In response, Chang said that housing prices are now on the high ground and their rate of return has declined, while the stock market has a better rate of return.
It is reasonable that capitals flow to investment targets with a higher rate of return, Chang said.
The minister pointed out three factors that have caused Taipei's surging property prices, namely abundant free-flowing capital, high demand and low supply and the expectation of continuously rising housing prices.
More Measures to Suppress Surging Prices
Chang said that property prices are slated to drop. However, he stressed that prices must come down over a number of years, instead of within a short period of time, so as not to cause any catastrophic consequences in the finance market.
The government will launch other measures to cool down surging realty prices. This, Chang said, will counter the popular expectation of a continuously booming real estate market. In addition to raising the “non-owner-occupied property” housing tax from 1.5 percent to 3.6 percent, the Ministry of Finance intends to build housing units for young people who cannot afford to buy new homes.
In addition, the government may grant tax benefits to landlords who rent out their housing units at a reduced price for low- to middle-income families, the minister said.
Pension Funds' Outstanding Performance
Thanks to booming stock markets in March around the globe, labor insurance and pension funds managed by the Bureau of Labor Funds, under the Ministry of Labor, profited NT$47.9 billion in the first quarter.
According to the Bureau of Labor Funds, the value of the labor pension fund totaled NT$1.1323 trillion while the labor insurance fund totaled NT$610.8 billion. At the end of March, the two funds' rates of return were pegged at 2.25 percent and 2.33 percent, respectively.