Taiwan’s housing market has been experiencing a significant surge in prices, reaching record highs this year. This trend of escalating housing costs has been ongoing for the past two decades, outpacing the increases seen in other advanced countries. The growth in housing prices can be attributed to a combination of factors such as high profits, low taxes, and a lack of adequate supply in the market.
The Rising Housing Prices in Taiwan
Taiwan’s housing prices have been steadily increasing over the years, with data from sources like Cathay and Sinyi indicating a notable uptrend. Unlike many other advanced countries where housing price growth has slowed down, Taiwan’s market continues to soar. The lack of an overall housing price index in Taiwan makes it challenging to quantitatively measure the extent of the price surge, but indicators like the Cathay and Sinyi house price indexes provide valuable insights.
Impact of Minimum Wage Growth on Housing Prices
Countries with faster housing price growth typically experience a parallel increase in minimum wage rates. However, Taiwan stands out as an exception, with its minimum wage growing at a relatively slower pace. This disparity between housing costs and minimum wage levels has resulted in Taiwan having one of the highest housing price-to-income ratios among advanced countries. The burden of mortgage payments in Taiwan is consequently among the highest, further exacerbating the affordability crisis for homebuyers.
Challenges in Housing Supply and Demand
One of the key contributing factors to Taiwan’s soaring housing prices is the insufficient supply of new dwellings. The country lags behind other advanced nations in terms of the number of residential licenses issued and social housing projects completed. This imbalance between supply and demand has led to a situation where Taiwan’s developers are scaling back or delaying housing projects to artificially drive up prices. The lack of new construction exacerbates the housing shortage and further fuels speculation in the market.
The low property taxes in Taiwan also play a significant role in driving up housing prices. Unlike other advanced countries where property taxes as a proportion of GDP are higher, Taiwan’s property tax share remains remarkably low. Properties in Taiwan are taxed based on only 10% of their market value, leading to a disproportionately lighter tax burden on luxury homeowners compared to those purchasing more affordable properties. This skewed tax system incentivizes speculative real estate investments and contributes to the overheating of the housing market.
The Influence of Profits and Savings on Housing Prices
Taiwan’s high profits and savings shares relative to its GDP have further fueled the housing price surge. The disproportionate allocation of profits and savings in Taiwan’s economy, coupled with declining wages and production taxes, has created an environment conducive to excessive housing speculation. The government’s reliance on land speculation for revenue generation has perpetuated the cycle of escalating housing prices, as local governments prioritize selling land to the highest bidders rather than addressing the housing affordability crisis.
President Lai Ching-te has expressed a commitment to protecting Taiwan’s housing rights from real estate speculators. To achieve this goal, raising the minimum wage, closing tax loopholes, and implementing stricter regulations on property transactions are essential steps. By increasing government revenue through higher wages and taxes, Taiwan can invest in the construction of more affordable housing units to alleviate the housing shortage and create a more sustainable housing market for its citizens.
In conclusion, Taiwan’s housing market faces significant challenges due to a combination of factors such as high profits, low taxes, inadequate supply, and skewed economic policies. Addressing these issues requires a comprehensive approach that involves increasing wages, reforming the tax system, and promoting sustainable development in the housing sector. By taking proactive measures to curb speculation and promote affordability, Taiwan can ensure a more equitable and stable housing market for its residents.