Date
19 October 2017
Taiwan's property prices have surged amid hopes the government will soon relax curbs on home purchases by mainlanders. Photo: Bloomberg
Taiwan's property prices have surged amid hopes the government will soon relax curbs on home purchases by mainlanders. Photo: Bloomberg

Taiwanese see mainland hand in rising property market

Taiwan’s economy is weak, data published since the start of the year suggests — gross domestic product grew 1.8 percent in 2013, the average monthly pay of workers has declined to a level last seen in 1997, and unemployment is at 4.2 percent.

One figure bucks the trend. Property prices at the end of September 2013 were 22 percent higher than at the end of 2011, one of the fastest increases in Asia and second to Hong Kong with 24 percent.

A three-room apartment measuring 27.1 ping (one ping equals 3.3 square meters) at the upmarket Renai Lu in central Taipei costs NT$27.5 million (US$4.54 million).

Property is one of the most sensitive political issues in Taiwan. A survey of young people in Taipei published in October found that only 6.4 percent had bought their own homes; 23.8 percent were renting and the rest living with parents or relatives. Meanwhile, 56.6 percent were considering postponing marriage or having a baby because of the problem of buying a home. On the entire island, only 17.8 percent of young people had bought their own homes.

What explains this disconnect between the incomes of the majority and rising property prices? Taiwan has one of the world’s strictest controls on residential property purchases by mainlanders, aimed at stopping property speculation.

The rule is known as 5-4-3 – a maximum mortgage of 50 percent of the purchase price, residence on the island for only four months a year and no resale for three years.

But investors, local and foreign, are buying on the expectation that these controls will be relaxed and billions of dollars will flow into Taiwan from the mainland, as they have gone into property markets in Vancouver, California, Houston, New York, Sydney and other cities favored by mainlanders for migration or investment.

Since he took power in May 2008, President Ma Ying-jeou, who is also head of the ruling Nationalist Party, has permitted the greatest opening of the island to mainland people and capital since 1949. Last year 2.2 million mainland Chinese visited Taiwan, an increase of 11 percent over 2012, and accounting for over a third of all visitors.

Investors are betting that this liberalization will continue, whichever party wins the 2016 presidential election, and the government will sooner or later allow mainlanders to buy residential property. When this happens, prices will soar.

However, public hostility to this liberalization is intense. A survey of 1,111 people published in the This Week magazine in December found that 46.8 percent thought mainlanders should be banned completely; a further 17.6 percent thought that restrictions on them should be more severe than for other foreigners. Many look at Hong Kong property prices as an example of what Taiwan must avoid.

In response, the Ministry of the Interior announced in November regulations to restrict residential property purchases by mainlanders, with the total purchases of land capped at 13 hectares and buildings at 400 units per year. In addition, long-term total land purchase by mainland residents is capped at 1,300 hectares and 20,000 buildings. The regulations took effect from January this year. These restrictions do not apply to purchase of commercial property; mainland firms can buy property for the use of their staff.

For wealthy mainlanders, Taiwan is one of the most attractive places in the world to retire or buy a second home. Its people speak Mandarin – not Cantonese as in Hong Kong and Macau – and it has a quality of life equal to or better than that of many cities on the mainland. It has a mild winter, excellent food, mountains and beaches. It is a Chinese society – not like the United States, Canada, Australia and New Zealand, the main choices for migration by mainlanders; unlike young people, many middle-aged and elderly people find it hard to adapt to the lifestyle of these countries.

Wang Jian-min, 57, is a potential buyer. A resident of Beijing for 40 years, he has three properties in the capital as well as two in Weihai, Shandong, his native province. “The pollution in Beijing has become intolerable,” he said. “It took London 40 years to cure it. That is too long for me. I will be dead. I am looking at cities in southern China and at Taiwan for retirement. I have been there often and have many friends there.”

His only child, a son, is studying for a doctorate degree in telecommunications in the US. In the future, he may work in the US or elsewhere; in any event, he cannot count on his son to live with him and his wife, and support them.

There are ways for Wang and others like him to get around the regulations. They can use Taiwan friends and business partners to make the purchase – just as they helped them to buy properties on the mainland. They can purchase through companies in Hong Kong, the Cayman Islands, the US or other third countries. It is hard for the government to track the source of funds of individual purchases.

How can Taiwan protect the interests of those who want to buy homes and at the same time attract outside capital?

– Contact HKEJ at [email protected]

CG

 

 

 

Hong Kong-based journalist and author. He had worked as a correspondent for the South China Morning Post in Beijing and Shanghai.

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