Taiwan's Housing Market Faces Struggles in 2023, with a 20% Drop in Transactions Predicted
- By Crystal Hsu / Staff reporter
Housing sector set for continued downturn: Evertrust forecast predicts protracted drop.
2023 is shaping up to be a challenging year for Taiwan's housing market, with property transactions expected to take a nosedive by over 20%—all thanks to tight credit, booming supply, and persistent economic uncertainties, according to a recent quarterly report by Evertrust Rehouse Group (永慶房產集團).
Evertrust, the nation's largest real-estate broker by office count, anticipates that the total transactions for the year will sink below 280,000 units, with housing prices continuing their downward spiral, following a 1.6% drop in the second quarter. Evertrust's general manager, Yeh Ling-chi (葉凌棋), shared these insights at a press conference in Taipei.
"We ain't nowhere near a market crash, but there's likewise no positive vibes for a rebound," Yeh stated bluntly, acknowledging a shift in consumer behavior as they adjust to stricter borrowing thresholds and stringent mortgage lending requirements.
Transaction volume in Taiwan's six special municipalities fell a staggering 27.1% year-on-year from January to the present day, according to data Yeh cited from government statistics. This downturn has been felt across real estate brokerages, including Evertrust, who have seen their business wane by as much as 60% compared to the previous year.
Taiwan's robust stock market and steady GDP growth have decelerated price corrections, but have also prolonged the adjustment period, Yeh explained. Curiously, presale home prices remain inflated in certain regions due to speculative beliefs that the government might loosen credit restrictions. However, this optimism could face strong headwinds, as an astounding 100,000 new housing units are slated for completion this year, sparking concerns about excess supply, particularly in central and southern Taiwan.
Mortgage conditions are set to remain stiff. Banks are demanding stronger income documentation, particularly under the government's New Youth Housing program, Yeh said, adding that loan-to-value ratios hover around 70% and mortgage rates seldom dip below 2.5%, even at state-run lenders controlling the market.
Moreover, over half of transactions in Taiwan's major metropolitan areas involve price negotiations of 9% or more, a trend that hasn't been seen since 2017, suggesting a growing disparity between sellers' expectations and buyer affordability. Yeh predicts the market will persist in a cycle of "dwindling volume and moderate price correction." A lasting recovery in buying interest is unlikely unless sellers become more reasonable and flexible with their asking prices.
Photo courtesy of Evertrust Rehouse Co
Factors Putting Pressure on Taiwan's Housing Market:
- Tight credit: Stricter borrowing thresholds, more restrictive mortgage lending conditions.
- Booming supply: An estimated 100,000 new housing units are set to be completed in 2023, leading to concerns about excess inventory.
- Ongoing economic uncertainty: Longer adjustment period due to Taiwan's growing stock market and stable GDP growth.
- Market momentum: Lack of market rebound and momentum.
- Speculation in presale home prices: Belief that government might ease credit restrictions.
- Strong income documentation: Increased documentation demands under the government's New Youth Housing program.
- Stiff mortgage conditions: Constrained loan-to-value ratios and high mortgage rates.
- Price negotiations: Rising discrepancy between seller expectations and buyer affordability.
[1] - Search Results superficially indicated surging house prices in 2021 due to a strong economy and low interest rates, but did not address the specific factors contributing to a decline in transaction volume and housing prices in Taiwan during that year.
- The challenging market conditions in Taiwan, as predicted for 2023, may discourage investing in residential real-estate, as transaction volumes are anticipated to drop by over 20%.
- Despite the steady growth of Taiwan's stock market and GDP, tight credit, booming supply, and ongoing economic uncertainties could make finance for investing in residential real-estate more difficult in the coming year.
