TAIPEI (Taiwan News) — The Central Bank on Thursday (Sept. 19) launched a four-pronged approach to crack down on housing speculators.
At the Central Bank's third-quarter board meeting, it decided to keep interest rates unchanged for the second consecutive time while raising the reserve requirement by 0.1%. To rein in real estate speculation, the bank announced a seventh wave of selective credit controls with four main measures, per CNA.
First, individual buyers with existing properties cannot have a grace period for their first home loans. This means buyers will have to simultaneously pay the interest and principal.
Second, the loan-to-value ratio for second-home mortgages has been tightened from 60% to 50% nationwide. The loan-to-value ratio is the percentage of the house's value financed with a mortgage.
Third, for corporations and individuals who purchase luxury homes and third-house mortgages, the loan-to-value ratio has been lowered from 40% to 30%. Fourth, the loan-to-value ratio for developers who use unsold homes as collateral has been reduced from 40% to 30%.
Following the implementation of the Ministry of Finance's new housing stabilization plan, both prices and transaction volumes in the housing market have surged, leading to a significant increase in the housing loan business for domestic banks. This has pushed loan levels close to regulatory limits.
The Central Bank on Aug. 21 publicly urged banks to present a one-year plan for improving their real estate lending.
Due to a housing loan shortage in the market from late August to early September, the finance ministry has given clear directives to banks to prioritize three types of loans: first-time homebuyers, self-use residential loans, and previously committed loans.
The Central Bank's board meeting on Thursday saw interest rates unchanged for the second consecutive time. However, the Central Bank has taken strong action on the housing market by not only raising the reserve requirement ratio but also implementing selective credit controls.
These housing market control measures will take effect from Friday (Sept. 20).
