Housing market expansion slows down as the fervor cools, leading to decreased mortgage expansion.
Domestic Mortgage Growth Slows Amid Housing Market Cooling in Taiwan
Domestic banks extended mortgages by NT$42.15 billion last month, a deceleration from the previous month's increase of NT$46.47 billion, as per data revealed by the central bank. This marks the slowest annual increase in mortgages since April last year, growing by NT$907.67 billion or 8.8%.
Despite the continuous monthly increase in mortgages since early 2023, pushing the outstanding balance to a record high of NT$11.22 trillion last month, the overheated housing market is showing signs of cooling. The central bank attributes this to lenders tightening mortgage terms and becoming more conservative in extending new loans, while buyer sentiment weakens as a result of economic uncertainties, particularly the impact of the U.S. government's tariff policies.
Local land administration agencies reported a 24.34% year-on-year decrease in housing transactions in the six special municipalities in the first four months of the year. Key cities like Tainan and Kaohsiung saw transaction numbers drop to eight-year lows, while New Taipei City reported the lowest number of deals in nine years.
In addition to the decline in market demand, construction loans, an indicator of real-estate developers' confidence, also experienced a slowdown. Last month, construction loans rose by NT$94.6 billion annually, marking the slowest increase since August last year. This conservative stance among builders and developers is likely due to the uncertain macroeconomic climate and the impact of regulatory tightening measures introduced by the central bank.
While commercial real estate transactions saw a 57% year-on-year decline in Q1, major developers expanded their land reserves, indicating a cautious approach to investing in commercial property. This overall subdued market confidence is adding to the cooling effect on Taiwan’s housing market.
In summary, a combination of tighter lending controls, economic uncertainty, and cautious buyer behavior are contributing to the cooling of Taiwan’s housing market, as suggested by central bank data and real estate brokerage reports.
The slowdown in mortgage growth suggests a possible impact on the finance sector, as domestic banks are extending fewer new loans amid the housing market cooling in Taiwan. The conservative stance among builders and developers, coupled with reduced buyer sentiment, might lead to decreased financial investment in the Taiwanese real estate market.
