HOUSING BOOM:
Stricter lending terms would stabilize the market, the central bank governor said, while a researcher warned investors could flee

• By Crystal Hsu / Journalist

Yesterday, the central bank kept interest rates unchanged for the seventh consecutive quarter, but tightened lending terms for mortgages for unsold homes, land finance and individuals owning three homes.

The discount and guaranteed hosting rates are to remain at 1.125 percent and 1.50 percent, respectively, while the rate on unsecured hosting will remain at 3.375 percent, he said.

The monetary policy official raised his forecast for GDP growth from 5.75% to 6.03% this year and forecasted growth of 4.03% for next year, but added that an uneven recovery and persistent economic uncertainty justifies the continuation of the policy.

“Strong economic performance does not extend to domestic service sectors and small and medium-sized enterprises,” central bank governor Yang Chin-long (楊金龍) said at a press conference in Taipei after the meeting quarterly of the board of directors of the bank.

If sectors also recover and inflation deteriorates, the central bank will increase interest rates by 25 basis points from levels before the start of the COVID-19 pandemic earlier this year. last, said Yang.

Yang warned landowners, especially young first-time buyers, to avoid excessive debt as the central bank moves towards monetary normalization next year.

Inflationary pressures in Taiwan are transient in nature, Yang said, pointing to weak bases of comparison last year.

“Taiwan has balanced supply and demand for most products, unlike the United States, where port congestion has caused supply chain disruptions and pushed up consumer prices,” Yang said. .

The inflation rate is expected to drop to 1.59% next year, from an estimated 1.97% this year, Yang said.

However, house prices would continue to rise amid optimistic sentiment from developers, global excess liquidity and the return of overseas businesses, Yang said.

To facilitate a soft landing, the central bank would reduce, effective today, the loan-to-value ratio (LTV) for retail mortgages from 55% to 40%, Yang said.

The LTV ratio of unsold homes would drop from 50% to 40%, while the LTV ratio of land finance would drop from 60% to 50%, with 10% to hold until construction begins, he said. .

Land loan borrowers will also be required to sign a document containing details and schedule for the planned development, Yang said, adding that he plans to discuss standard terms with lenders to create a level playing field.

The last two rounds of credit checks were aimed at preventing funds from spilling into the real estate market, rather than reversing real estate prices, Yang said.

“They will prove to be useful in the long run,” he said.

Andy Huang (黃 舒 衛), a researcher at real estate consultancy Knight Frank Taiwan, said the latest credit checks will weigh on real estate investors who have to produce more capital and wait longer to generate a profit.

If he is associated with the Interior Ministry’s plan to establish stricter requirements on transfers of pre-sale projects, investors would flee the market, Huang said.