The housing market in Taiwan: Will prices keep going up?

As of 2014, Taiwan statistically has the most severe case in the world when it comes to average pricing for houses in a capital city (Taipei) versus average income. In Taipei, housing now costs NT$10-12 million ($326,000-400,000) for a 30-35-ping apartment/flat minimum, with most pricing actually coming at around NT$15-20 million. While this may seem like common pricing for most housing in larger cities, average incomes are only around NT$50,000 a month.

House pricing in Taiwan has taken a huge increase over the last 10 years due to investors in Taiwan funding housing projects based off speculation. The speculation is based of the idea that new housing demand will increase as baby boomers reap in their long hard-earned money throughout the 70s-90s and plan to put it into new housing either for themselves or for their family members later into the 21 century, followed by selling the properties for increased profits of their own.

When these projects were developed throughout the 90s the amount at which people could buy and rent per a month to pay their mortgage was about the same. Housing was still under NT$10 million, with many units priced around NT$4-5 million, so people took the initiative to purchase homes even if it was based on renting them out.

This model proved successful into the early 2000s but it was then that investors started to take it overboard, investing in properties all over Taipei. Normally, if there was no demand for housing then pricing should have actually went down, as the market would be over-saturated. However, there were still enough buyers who bought in even at NT$10-15 million starting points with the belief that their investment would double over 10 years like it did in the past. The problem with this scenario is that these prices are well above what the average consumer can afford and as a result people have been hesitant to buy and there are many empty rooms throughout apartment complexes.

In such a scenario, many people have resorted to renting out their place but at a loss, as most mortgages for such places are at least NT$30,000-40,000, with the average renting price for the units at around NT$23,000-27,000. People now have seen the results of their predecessors and are now backing away form purchasing homes, both from an investment and pricing standpoint because there is simply no more room for pricing to remain that high.

Or is that so?

Some market observers believe that most of the buyers of such homes are from people who have enough wealth to spread around multiple homes, and even believe that as Taiwan becomes more liberal with its open door policy to China that eventually there will be enough Chinese buyers to take over many of the empty lots for their own personal use.

In Taiwan and China, it is far more common for wealthy people, which there is a ridiculous amount of, to invest in more than one property for their own use. Some people even use the spaces to raise more than one family. But whatever the case may be, owners of those properties are not necessarily in a bind for trying to sell them off, and therefore house pricing won’t necessarily go down, especially if they are being maintained for future generations, the observers said.

However, other observers said that such a model could only last so long, as eventually the amount of wealth for people buying homes in Taiwan would eventually fluctuate as well. However, that is where the Chinese come into play, the observers noted, adding that implementing more liberal laws on allowing Chinese to enter Taiwan and purchase property could keep development strong and cause pricing to remain high.

Therefore, such observers believe that house pricing will need another 10-20 years before we see any major difference in declines, if any at all, such observers believe.

However, rumors in the housing market are circulating, stating that developers are now moving to other parts of Taiwan to invest in other cities as well as more rural areas to take advantage of similar trends they expect to occur like in Taipei throughout the 1990s. House pricing is still relatively low throughout many parts of Taiwan’s smaller, yet developed cities such as Taichung and Tainan, and the investors are expected to go there as many Taiwanese believe there options of owning a house are now limited to smaller cities. If that were to occur, such patters as the one in Taipei could occur throughout island, but it could also draw out some of the demand in Taipei elsewhere, which in turn could bring pricing down in the capital city, the observers said in response to the rumors.

Meanwhile, Taiwanese remain pessimistic about owning property and for now are sticking to renting from someone who is either paid off their mortgage and is banking off the rent; someone who mistakenly made an investment is paying off money in addition to the collected rent; or from someone who does not need the money, but feels it is useful in helping pay off costs.