27 October 2016
Government policy dominates the housing market in Singapore (left), but in Taipei (right), the government is unable to effectively remedy the shortage of new housing. Photos: Bloomberg
Government policy dominates the housing market in Singapore (left), but in Taipei (right), the government is unable to effectively remedy the shortage of new housing. Photos: Bloomberg

How Singapore and Taiwan property markets differ

The property markets in Singapore and Taiwan have developed along different routes from that in Hong Kong.

In Singapore, up to 90 percent of households own their homes. And 80 percent of residents live in public housing units subsidized by the government.

Lee Kuan Yew, the first prime minister of Singapore, launched sweeping reforms to improve living conditions for residents, and the government also offered generous subsidies for its citizens to buy their own homes.

However, Singaporeans face many restrictions when buying these public housing units.

For example, they are only allowed to resell the flats five years after they buy them.

And each family is eligible for only one flat.

The unmarried are not eligible to buy public housing units until they reach 35 years of age.

Also, those who own a private flat need to sell their private unit within six months after they buy a public housing unit, to prevent speculation in the public housing market.

Singapore’s housing market picked up rapidly after the 2008 financial crisis. Housing prices recovered to precrisis levels within less than a year.

The government then unveiled a set of measures to cool down the market, including levying a higher stamp duty on sellers and tightening mortgage loans.

This shows the property market in Singapore is still dominated by government policy.

The government discourages short-term speculation, and most homes are bought for self-use.

By contrast, housing has become unaffordable in Taipei, and rental yields are low.

The boom in Taiwan’s housing market is not driven by the working class.

In 2008, Taiwan slashed estate duty to 10 percent from 50 percent, which has lured many businessmen into putting their money back into Taiwan.

And the abundance of liquidity around the world has created a housing market bubble over the last decade.

Property prices in Taiwan have surged about 10 percent per year, while mortgage loan growth has been almost stagnant.

Capital from abroad is the main driver for rising home prices.

On the supply side, about half of the residential housing in Taipei is over 30 years old, and many these old flats are located downtown.

There is very limited supply of new housing.

The supply shortage has put the government in a dilemma as it struggles to remove old housing amid strong resistance.

Against this backdrop, the local government imposed a tax in 2012 on high-end apartments worth over HK$19 million (US$2.45 million).

The tax rate is subject to the number and location of flats, and homeowners may end up paying three to 10 times more tax.

Meanwhile, the central bank in Taiwan also tightened mortgage loans, capping the mortgage ratio for second-home or luxury flats at 60 percent, compared with 80 percent or 90 percent in the past.

All these measures have achieved some results.

The housing market has witnessed lower prices and fewer transactions.

But the measures may not be so effective in the long run, given low interest rates and abundant liquidity.

This article appeared in the Hong Kong Economic Journal on Dec. 2.

Translation by Julie Zhu

[Chinese version中文版]

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General Manager, Head of Investment, Investment Management, Bank of China (Hong Kong)

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