The hottest target for investment in Taiwan nowadays is neither the robust stock exchange nor the soaring New Taiwan Dollar. Rather it is some 40-year-old, downtown Taipei apartments, which have increased in value by 10 percent annually over the last five years.
Hardly a day goes by without critics bashing Taiwan’s skyrocketing house prices. Numerous opinion polls have shown that the unaffordability of a decent home troubles the people of Taiwan the most, especially those living in the cities.
Prices, however, keep rising. According to a report released late February by Global Property Guide, an online publication on global real estate trends, Taiwan registered a 9.7 percent increase in house prices in 2010, with a surprising 7.38 percent in the fourth quarter. “Despite anti-speculative measures, real estate prices continue to soar,” the guide said. This may be good news for global investors, but to the many people who find it impossible to keep up with surging prices, it only means their dreams of home ownership are further out of reach.
In the last decade, housing prices in Taiwan, especially Taipei, have skyrocketed, said Hua Chang-i, an adjunct professor at National Taiwan University’s Institute of Building and Planning.
During the last five years alone, according to Hua, apartment prices in Taipei City have nearly doubled. “With Taiwan’s average income having grown less than three percent during the same period, the sense of relative deprivation has only worsened,” he said.
To address residence-related issues, the Ministry of the Interior has just finished drafting the Housing Act, which would create social housing units, provide subsidies to renters and require greater transparency in the listing of housing prices. According to Interior Minister Jiang Yi-huah, when the bill comes into effect, it will ensure Taiwan citizens’ housing rights. The highly anticipated law is pending legislative approval.
“Given the high demand on the housing market, the act is urgently needed to quell public dissatisfaction,” Hua said. “But Taiwan’s housing battle has only just begun,” he warned.
Various factors have contributed to the current housing mania, said Hua. “Ultra-low interest rates, the lowering of the highest inheritance tax rate from 50 percent to 10 percent and excess liquidity all play a part,” he said. Moreover, most people regard houses as investments that should increase in value over time. “They believe that having a house or two under their name increases their social status,” Hua said, adding that real estate agents exploit these ingrained beliefs and economic incentives to lure consumers into buying apartments they cannot afford.
To remedy this situation, the government should lease out reasonably priced houses for ordinary people to live in before they can afford to own their places, Hua said, saying social housing might be a solution to the problem.
“By definition, social housing projects are built and often managed by the government. They are leased to the general public at a price no higher than a region’s average rent,” Hua said.
Many European countries have had very successful public housing initiatives. In Germany and the United Kingdom, over 20 percent of the population lives in some form of public housing, while in the Netherlands the figure is 35 percent, according to the Social Housing Promotion Alliance, a nonprofit organization dedicated to affordable housing for all.
In Taiwan, by contrast, social housing accounts for only 0.08 percent of the housing market—a situation that the MOI hopes its latest proposal can begin to remedy. According to the plan, once the Housing Act becomes a reality, the government will gradually increase the percentage of social housing to account for at least 5 percent of the total.
In fact, several projects have been under way. The MOI selected in late 2010 a handful of sites in suburban Taipei City and New Taipei City for social housing complexes. Upon their scheduled completion in 2013, up to 1,600 reasonably priced homes will be available.
Though well-intentioned, the plans have met with strong resistance from current residents of the communities where the new buildings are scheduled to be built. It is the familiar not-in-my-back-yard mentality.
“The general public in Taiwan tends to think that social housing is reserved for poor, disadvantaged or troubled families,” said Peng Yang-kae, standing director of the Organization of Urban Re-s, a group of Taiwanese architects involved with urban planning issues. “Some residents around the designated social housing sites thus are dreadful of the whole idea.”
They need not fear, Peng added. Successful examples in the Netherlands and the UK have shown the positive effects of social housing projects on erasing prejudices. “In Amsterdam, 50 percent of residence is rented social housing,” Peng said. “Yet the Dutch government has managed to integrate more well-off families with the less affluent, and to maintain very high quality around the complexes. It all depends on thorough planning and efficient management,” he said.
Moreover, social housing can help curb rising property prices. According to Peng, adequate supply of moderately priced homes for rent will make it harder for developers and speculator to profit from selling and flipping properties. “The housing market will become healthier as a result,” he said.
Expanding public housing, however, will solve only part of the problem. “It’s necessary for the government to provide people with a place to stay, yet regulations designed to curb speculation is also urgently needed,” Peng said.
The opaqueness of real estate valuation is a major factor in housing inflation. Real estate agents, rather than the laws of supply and demand, are dictating how much a house is worth, Peng said. “Agents control the flow of information to create the impression that houses are becoming scarcer and ever pricier, so people feel they have no choice but to jump on the house-hunting bandwagon,” he said. The playing field will become fairer if potential buyers know how much sellers paid for their houses and when they purchased them, he added.
Another way to fix the housing market would be to establish laws preventing sellers from making obscene profits on real estate transactions. Engaging in real estate profiteering is punishable by law in some European countries. In Germany, for example, courts can impose sentences of up to three years in prison on property developers who overprice their products. This prevents real estate prices from getting out of hand, analysts said.
The issue of housing is intertwined with social security, economic stability and the public perception of the disparity between rich and poor, Peng said. “Social housing is only the first step toward a reasonable housing environment, where rising real estate values are shared among hardworking citizens instead of being monopolized by developers,” he added.
Affordable housing is a priority for many people in Taiwan, as it is for many societies all over the world, Peng said. “With social housing underway, Taiwan still has a long way to go before its people can all dwell in the homes of their dreams,” Peng said. (HZW)
Write to Kwangyin Liu at kwangyin.liu@mail.gio.gov.tw