After the first-quarter board of supervisors meeting, the Central Bank of Taiwan announced a one-stop increase in policy interest rates, which exceeded market expectations and sparked discussions on housing prices. However, judging from Taiwan’s past experience of raising interest rates and the rising trend of housing prices, Taiwan has had two interest rate hike cycles in the past 20 years, but housing prices have still risen by more than three times. Will the cycle of interest rate hikes cause significant pressure on housing prices? The key should be “how much to rise and how long to rise continuously”.
The central bank estimates that the average mortgage balance in Taiwan is 7.63 million yuan, and the interest rate increase will increase the interest burden by regarding 19,075 yuan per household each year.
Logically, the increase in the interest burden will not only help curb the hype of investors, but may also make first-time buyers or those who change houses timid, resulting in a slowdown in demand in the overall housing market and a drop in housing prices.
However, according to the Xinyi House Price Index, from 2001 to the end of 2021, the average house price in Taiwan has risen 3.6 times over the past 21 years.
Judging from the history of interest rate hikes in Taiwan, the consecutive interest rate hike periods were, from July 2003 to June 2008, when the rediscount rate increased from 1.375% to 3.625%, and from May 2010 to July 2011, when the rediscount rate increased from 1.375% to 3.625%. From 1.25% to 1.875%.
In other words, it can be observed from historical data that if the time is prolonged, the trend of interest rate hikes cannot quickly and obviously suppress housing prices.
After the central bank raised interest rates by 1 yard this time, the policy rate came to 1.375%, which was 2 yards from the high point of the last interest rate hike cycle. The policy rate, which broke through the previous cycle of interest rate hikes, moved towards the pre-2008 level of over 2%.
If the war between Russia and Ukraine eases, the bottleneck of the shipping supply chain eases, the pressure on raw materials and freight rates will ease, and the domestic interest rate hike will ease the rise in prices. At that time, the central bank may not necessarily follow the United States. The dynamic of interest rate hikes, the adoption of continuous and strong interest rate hikes.
From the perspective of supply, due to the rising land cost, material cost and labor cost of builders, coupled with the return of Taiwanese companies and the expansion of factories by domestic manufacturers in recent years, there is a strong demand for land, factory offices and commercial offices, or There may also be some support for real estate.
Real estate brokers pointed out that this time the central bank raised interest rates by 1 yard, it will not have too much impact on the housing market, and this time it did not upgrade the control of second home loans. Therefore, the next highlight of the housing market is to observe the prohibition of pre-sale and contract exchange. The policy to promote the progress, and whether it will “rise without interest” in the future, especially at present, nearly 25% of the home buyers in Taiwan have a loan amount of more than 10 million yuan. Buyer’s willingness and budget to buy a home.
It’s not just the home loaners who feel this way. In fact, following the interest rate hike is launched, even renters are not immune. It has been reported that some landlords have raised rents to pass on the extra cost to tenants.
On the whole, from the historical experience, following the central bank resorted to the cycle of raising interest rates, there has been no obvious effect of suppressing housing prices in the long run. In particular, construction costs have risen in recent years, and the demand for Taiwanese companies to build factories is strong. The housing market will eventually evolve into oversupply, Are house prices falling significantly? It is still difficult to draw a conclusion, but what is certain is that in the future, housing prices will tend to be “easy to fall and difficult to rise”. As for whether the price can reach the level that ordinary people can afford to buy a house, I am afraid it is not so easy.