Despite the introduction of a property tax and other anti-speculative measures early this year to cool the residential property market, house prices in Taiwan continue to surge.
The national average house prices soared by 8.2% y-o-y to Q2 2011, according to Sinyi Realty, Taiwan’s biggest real estate brokerage. On a quarterly basis, house prices rose by 3% over the same period.
House prices in all areas have increased:
• Taichung had the biggest house price increase of 19.7% y-o-y to Q2 2011. But house prices rose by just 1.6% in the second quarter.
• In Kaoshsiung, house prices rose by 16.5% during the year to end-Q2 2011 and by 2.1% in Q2.
• House prices in New Taipei rose by 15.4% in the year to Q2 2011. However, New Taipei recorded the lowest quarterly price increase among all regions in Q2, of 1.1%.
• In Taipei, house prices rose by 14.2% y-o-y to Q2 2011. Taipei had the highest Q2 increase, at of3.1% .
The ongoing boom is a result of Taiwan’s improved relationship with China, low interest rates and increased credit availability.
As the property market has heated up, the Central Bank of China (CBC) has implemented prudential measures to curb bank real estate lending.
A strict enforcement of a 70% loan-to-value (LTV) ratio for all new lending began in June 2010. Then in June 2011, a luxury tax was implemented in Taiwan. Property not used as a primary residence by the owner, and sold within two years will be levied a 10%-15% tax. However, property demand is still expected to remain strong despite government curbs, because of very strong economic growth.
The central bank is expected to raise the key interest rate to 1% by the end of this year from just 0.125%. Mortgage rates, which stood between 1.7% and 1.8%, are also projected to rise this year, according to local property experts.
In May 2011, total mortgage loans increased by 4.55% y-o-y to NT$5,237 billion (US$178.9 billion), according to the DTZ Research-Taipei. Meanwhile, the total amount of construction loans rose by 19.07% y-o-y to reach NT$1,349 billion (US$46.1 billion).
The national average house prices soared by 8.2% y-o-y to Q2 2011, according to Sinyi Realty, Taiwan’s biggest real estate brokerage. On a quarterly basis, house prices rose by 3% over the same period.
House prices in all areas have increased:
• Taichung had the biggest house price increase of 19.7% y-o-y to Q2 2011. But house prices rose by just 1.6% in the second quarter.
• In Kaoshsiung, house prices rose by 16.5% during the year to end-Q2 2011 and by 2.1% in Q2.
• House prices in New Taipei rose by 15.4% in the year to Q2 2011. However, New Taipei recorded the lowest quarterly price increase among all regions in Q2, of 1.1%.
• In Taipei, house prices rose by 14.2% y-o-y to Q2 2011. Taipei had the highest Q2 increase, at of3.1% .
The ongoing boom is a result of Taiwan’s improved relationship with China, low interest rates and increased credit availability.
As the property market has heated up, the Central Bank of China (CBC) has implemented prudential measures to curb bank real estate lending.
A strict enforcement of a 70% loan-to-value (LTV) ratio for all new lending began in June 2010. Then in June 2011, a luxury tax was implemented in Taiwan. Property not used as a primary residence by the owner, and sold within two years will be levied a 10%-15% tax. However, property demand is still expected to remain strong despite government curbs, because of very strong economic growth.The central bank is expected to raise the key interest rate to 1% by the end of this year from just 0.125%. Mortgage rates, which stood between 1.7% and 1.8%, are also projected to rise this year, according to local property experts.
In May 2011, total mortgage loans increased by 4.55% y-o-y to NT$5,237 billion (US$178.9 billion), according to the DTZ Research-Taipei. Meanwhile, the total amount of construction loans rose by 19.07% y-o-y to reach NT$1,349 billion (US$46.1 billion).
Analysis of Taiwan Residential Property Market »
RENTAL YIELDS
Last Updated: Apr 04, 2011
Taipei now vies with Monaco for having the lowest yields in the world. With buying prices per square metre averaging a steller US$7,200 to US$9,200, depending on size, and rents still affordable (where else can you rent a US$1.8 million home for just US$2,200 per month?), Taipei is not a happy place for landlords.
The owner of an apartment in Taipei will be lucky to realize 2% yields, except on the very smallest apartments. Given that the Global Property Guide’s figures are for gross rental yields, i.e., do not make any allowance for vacant periods, for legal costs, administration costs, cleaning and repairs, rental taxes, property taxes, and other taxes, it is safe to say that landlords in Taiwan earn nothing on their apartments.
We believe apartments in Taipei are overvalued - and will fall in price. But we should warn readers that we can get it wrong!
The owner of an apartment in Taipei will be lucky to realize 2% yields, except on the very smallest apartments. Given that the Global Property Guide’s figures are for gross rental yields, i.e., do not make any allowance for vacant periods, for legal costs, administration costs, cleaning and repairs, rental taxes, property taxes, and other taxes, it is safe to say that landlords in Taiwan earn nothing on their apartments.
We believe apartments in Taipei are overvalued - and will fall in price. But we should warn readers that we can get it wrong!
Read Rental Yields »
TAXES AND COSTS
Last Updated: Jun 13, 2011
Rental Income: The gross income of nonresidents is taxable at 20% with no exemptions or deductions allowed. There is also 5% VAT on rentals.
Capital Gains: Capital gains realized by nonresidents are treated as regular income, and are taxed at the personal tax rate of 20%.
Inheritance: Estate duty is levied at 10%.
Residents: Residents are taxed on their income from Taiwanese sources at progressive rates, from 5% to 40%.
Capital Gains: Capital gains realized by nonresidents are treated as regular income, and are taxed at the personal tax rate of 20%.
Inheritance: Estate duty is levied at 10%.
Residents: Residents are taxed on their income from Taiwanese sources at progressive rates, from 5% to 40%.
Read Taxes and Costs »
BUYING GUIDE
Last Updated: Nov 16, 2006
The total roundtrip cost of buying and selling a dwelling is around 10.26% - 13.3% of the property's value, including the real estate agent's 4% - 6% fee, which is shared by the buyer (1% -2%) and the seller (3% - 4%). To register the property requires three procedures, which can be completed in about five days.
Read Buying Guide »
LANDLORD AND TENANT
Last Updated: Jun 27, 2006
If the tenancy laws were properly followed, Taiwan could be regarded as pro-tenant.
Rent Control: There is rent-control, and tenants have security of tenure. However, most landlords catering to the low income segment do not follow the law.
However, those who cater to the expatriate and high income market have no choice but to follow the law. To avoid the legal disadvantages, most high-end apartments rent as serviced apartments.
Read Landlord and Tenant »
ECONOMIC GROWTH
Last Updated: Sep 03, 2011
Very strong economic growth
In July 2010, Taiwan and China co-signed the Economic Co-operation Framework Agreement (ECFA) reducing tariffs and trade barriers between the two countries. The agreement is expected to expand Taiwan’s GDP by about 4.5%, or US$21 billion in 2011, according to the Peterson Institute for International Economics.Consistent with the goals of the ECFA, the International Monetary Fund (IMF) has recently elevated its GDP growth forecast for Taiwan from 6.5% in April to 7.7% in July 2011. The rosy outlook was attributed to the rising local and foreign investments.
Stronger ties between Taiwan and China began when President Ma Ying-Jeou of the Kuomintang Party took office in May 2008. He vowed greater cooperation with mainland China and denounced independence for Taiwan, a sharp contrast to his predecessor, Chen Shui-bian.
In his inaugural address, Ma promised “no independence, no reunification and no war” during his presidency. Since 2009, several memorandums of agreement between Taiwan and China on financial cooperation have been signed. These symbolic gestures reassured both investors and homebuyers alike.
Taiwan’s seasonally-adjusted unemployment rate has been improving for 18 months in a row, and stood aat 4.6% in February 2011, according to Asia Monitor. However, economists predict a slight increase in the unemployment rate to 4.7% at end-2011 given the Japan earthquake.
In 2010, the country’s unemployment rate was 5.21%
In 2011, the government raised its inflation forecast to 2.18% from the previous 2%. In 2010, Taiwan’s inflation rate was just 0.96%.
To tame inflationary pressures, Taiwan raised its benchmark interest rate by 12.5 basis points in March 2011, to 1.75%.
Ref:globalpropertyguide
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