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Taipei has housing bubble: Finance Minister

TAIPEI, Taiwan -- Government officials said yesterday that the real estate market in Taipei City satisfies the conditions to be designated as a housing bubble.

Finance Minister Chang Sheng-ford (張盛和) and central bank Deputy Governor Yang Chin-lung (楊金龍) attended a Legislative session yesterday to report on the government's progress in establishing a healthy real estate market.

Legislators yesterday questioned the effectiveness of the government's measure, as surging housing prices in Taipei City are making it increasingly difficult for youngsters to purchase new houses.

When asked if Taipei's housing prices are higher than those in other countries, Yang said that housing prices in Taipei are 12 times the average domestic annual income, while global housing prices are usually five times that of average annual income.

Housing Demand Exceeds Supply

Finance Minister Chang attributed surging housing prices to three causes: capital overflow, high market demand, and expectation of higher prices in the future.

Chang pointed out that Taipei's real estate market has satisfied the conditions to be classified as a housing bubble. Chang said that housing demand exceeds supply by 80,000 units in Taipei City, while supply exceeds demand by 70,000 units in New Taipei City. There is speculation that climbing housing prices in New Taipei City have been influenced by Taipei City.

After the government lowered the inheritance tax rate, up to NT$600 billion has been remitted to Taiwan from abroad. While much of the money was stashed in banks, part of the remittances went into the real estate market, Chang said.

Chang stressed that the “right measures” are needed to build a healthy real estate market. Taxation measures need to be rolled out to accompany monetary policies in order to make the latter policies effective, Chang said, adding that, however, it is the central bank that dictates monetary policy.

Urban Renewal a Key Measure

In order to solve the problem of demand exceeding supply, the government must continue to implement “urban renewal” policy, Chang said.

Chang said that Taipei is running out of land. While the government tries to provide better transportation that connects central Taipei and its outskirts, only urban renewal can help to address the shortage of housing units.

There are many 2-story and 4-story apartments more than 30 years old. Under urban renewal programs, such buildings may be demolished and replaced with taller apartment units. With more supply, housing prices can be expected to come down, Chang said.

Yang said that the government's policy of maintaining a healthy housing market does not necessarily mean that it will attempt to “suppress” housing prices. The goal is to prevent a housing bubble, and the central bank's measures have yielded positive results, Yang said.

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 Ex-official charged in land grab gets bail 
Minister of Finance Chang Sheng-ford (張盛和), left, cautions the public about a possible bursting of Taiwan's real estate market bubble at the Legislature's Finance Committee alongside Central bank Deputy Governor Yang Chin-lung (楊金龍), Wednesday. Chang yesterday said that because Taiwan's stock market remains in the doldrums on low turnover, it has lagged behind the real estate market. (CNA)

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