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Challenges Facing Taiwan's Housing Market

Taiwan's real estate market is currently facing numerous challenges as the grace period for the new Youth Housing Loan expires, raising concerns among brokers that many homeowners who can no longer afford their loans might be forced to sell their properties ahead of time. As banks tighten lending limits based on credit controls, the liquidity in the housing market is negatively affected. Additionally, the central bank's recent decision not to raise interest rates indicates a cautious approach amidst a complex international economic environment. Coordination between the Ministry of Finance and the Financial Supervisory Commission could play a crucial role in mitigating the risk of a housing market crisis. Presently, the phenomenon of real estate imbalance in Taiwan has become increasingly severe, with many construction companies suffering from high debt ratios. If the housing market continues to be under pressure in the coming years, we may see a correction in real estate prices. The government must create policies that support the real economy and foster innovation to generate more opportunities for young people to prevent prolonged economic downturns.

Highlights

• The Youth Housing Loan has a 5-year grace period which may trigger forced sales.
• Recent credit controls have led to a decrease in mortgage limits from Taiwanese banks.
• An increasing real estate imbalance raises market risks for highly leveraged construction firms.
• The central bank's decision to maintain interest rates is a cautious response to international conditions.
• Taiwan's income-to-house-price ratio is exceedingly high, requiring institutional reforms for young buyers.
• The government needs to design more effective policies to promote real economic growth.
• Taiwan's economic structure must pivot from reliance on real estate to diverse development.
• A decrease in transaction volumes and increased market supply could lead to falling prices in the short term.
• Credit control measures require coordination across various government departments to be effective.
• Taiwan should learn from the historical real estate crises faced by countries like China and Japan.