Taiwan

Taiwan's central bank moves to curb housing prices

(Xinhua)
Updated: 2010-06-25 17:12

TAIPEI - Taiwan's reserve bank imposed a restrictive measure on housing loans from Friday in a bid to curb housing speculation in Taipei, while raising the interest rate for the island.

If any resident in Taipei or neighboring Taipei County wants to buy a second residence, he can only borrow a maximum of 70 percent of the property's total price. The loan ceiling used to be 80 or even 90 percent.

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The average house price in Tapei has increased by 20 percent from last year to 150,000 New Taiwan Dollars per square meter ($4,687), said Hsu Chia-shinn, an analyst from a local housing broker H&B Business Group.

"Housing prices have a reached record high, which drew complaints from the public. That's why the authorities made such moves," she said.

The bank also raised the interest rate by 0.125 percentage points to 1.375 percent on Friday, the first such move in 18 months.

"The interest rate raise would not have much affect really but it sent the signal that the authorities wanted to curb speculation," Hsu said. "Making it more difficult to get a loan will hit investors looking to profit in the short-term as their financial liquidity will be greatly compromised."

There will likely be a dramatic shake up of Taipei's housing market as investors pull out, however such measures should ensure the market remains healthy, she said.

The island introduced similar restrictive measures in 1989, resulting in low house prices for more than a decade.