Taiwan’s housing bubble is bigger than anyone admits
July 4, 2013 Leave a comment
Taiwan’s housing bubble is bigger than anyone admits
Editorial 2013-07-03
Declining real income and surging housing prices in Taiwan continues to worsen, along with the stagnation in the country’s economy, even though the government has reiterated that it has taken stock and is trying to deal with the situation. Government data show that real income during first four months of this year dropped to a level comparable to 15 years ago, while the average unit price of new housing purchases in Taiwan’s six major metropolitan areas hit a record high of NT$245,000 (US$8,155) per ping (3.3 square meters) during the first quarter.Taiwan’s central bank warned about the housing bubble earlier this month, saying the estimated 1.43 million empty homes in 2012 were indicative of the unchecked surge in property prices.
Although the central bank also pointed out that the housing bubble has been created by easy credit availability in the market, it decided not to adopt further measures in response during a recent policy meeting held at the end of June.
Such a situation would act as a prelude to an economic disaster, as evident in the example of what has happened in Spain, Ireland and Greece in recent years.
But Taiwanese investors have chosen to indulge in the illusion of a booming housing market and have ignored the signs of a bubble forming in the market, while the government mistakenly views the property market as the main driver of the economy.
The central bank needs to introduce credit tightening measures to stop speculators from hoarding property and prevent the housing bubble from further ballooning. The government and the public must recognize the seriousness of the problem and extend their full support to the central bank.
Only by doing so can Taiwan pull itself out of the current stagnating economic scenario.
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