Housing prices hit new high in fourth quarter of last year

This article was published by the Taiwan Headlines on March 31, 2006. It reports that in the fourth quarter of 2005, the average housing prices in Taiwan were equal to 6.9 times the average annual income of local people. This means that local people can only afford to buy a home outright if they spend on nothing else for almost seven years. The ratio was significantly higher than the figure of 5.96 in the same period in 2004.

According to the Council for Economic Planning and Development, the ratio in Taipei City was even higher - the average housing prices were 8.9 times the average annual income of the city's residents in the fourth quarter of 2005.

These figures show that housing prices in Taiwan are soaring at a pace that is greater than the increase in people's income. If housing developers do not make necessary adjustments according to this trend, then the real estate industry may soon come to a bottleneck because not many people can afford to buy houses.

Industry analysts agree that the increasing ratio is bad news for the real estate market. They suggest that a more detailed analysis needs to be conducted to determine whether the rise in average housing prices is the result of recent releases of various upscale housing projects that target at high-income earners.

According to officials from the Council for Economic Planning and Development, the situation will remain "unreasonable" unless the average housing prices in Taipei City can be lowered to about 5 times that of the average annual income of the city's residents.

Meanwhile, in the fourth quarter of 2005, Taiwan's housing price confidence index stood at 99.15, the lowest level over the past two years. The figure was 9.75 points lower than that over the same period in 2004. It was the first time the index has dropped below 100 since the third quarter of 2003.

The confidence index for medium-term and long-term housing prices in Taiwan fell even lower to 92.09, which indicates a lack of public confidence in the real estate market at present. Such low confidence appears to be the result of soaring housing prices. Since the income of people in Taiwan is unlikely to increase dramatically in the near future, the housing demand is expected to slow down and in turn affect the real estate market.