Taiwan’s property market slowing down

This marked the fourth consecutive quarter in which a yellow-blue light had appeared, indicating sluggishness in the property market, the report said.

The overall monitoring score dropped to 8 in the first quarter, the lowest level recorded since the first quarter of 2002, the report showed.

The composite index of leading indicators — a barometer of the market’s outlook in the coming two quarters — stood at 101.51 in the first quarter, down 0.88 percent from the fourth quarter of 2007.

Meanwhile, the index of coincident indicators, which represents the current situation, declined 1.66 percent to 99.11.

According to a survey conducted May 10-31 by the ABRI among businesses involved in the real estate sector, 59.69 percent of respondents thought the property market situation in the first quarter was worse than the previous quarter, while only 12.4 percent thought the situation was better.

However, 24 percent of respondents predicted the situation will improve in the second quarter and 48 percent predicted it will be better in the third quarter.

Chang Chin-o, a professor at National Chengchi University’s Department of Land Economics, noted that rising fuel prices and electricity rates are eroding the public’s real earnings, which has weakened their purchasing power and their ability to buy homes.

While home purchases have been widely believed to provide a hedge against inflation, rising interest rates are lowering the public’s desire to buy homes, because real estate is less effective as an inflation hedge when home buyers are required to spend more on mortgage payments, Chang said.

Chang said the fact that the monitoring indicators have signaled a slowdown despite mostly positive news about the real estate market in the first quarter shows that the market is returning to fundamentals and making a slight downward correction.

Yeh Shih-wen, deputy chief of the ABRI, said the positive news released in the first quarter included the possible launch of direct cross-Taiwan Strait transport links after the election of Kuomintang presidential candidate Ma Ying-jeou, the growth in commercial property transactions, and a sharp rise in consumer confidence in the property market.

Negative news that appeared during the same period included the increase of the average housing price to 7.5 times local residents’ annual income and an increase in home buyers’ spending on mortgage payments, which accounted for 33.1 percent of their income in the first quarter, Yeh said.

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