Welcome to this episode of "Knowing Fortune," where we'll discuss the largest housing delivery wave in Taiwan's history and explore potential opportunities for buyers. We'll analyze the current market dynamics and examine factors influencing housing prices.
Current Market Dynamics
Cooling Market Conditions
The real estate market is experiencing a significant shift from last year's frenzy. While 2022 saw high demand and limited negotiation power for buyers, the current market presents a different landscape. Construction companies are now more willing to negotiate prices, a stark contrast to the previous "take-it-or-leave-it" environment.
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Reduced Transaction Volume: Real estate transaction volumes have significantly decreased, indicating a cooling market. Pre-sale transaction volume has dropped below 5,000 units for four consecutive months.
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Price Adjustments: The prices of existing homes have begun to reverse their upward trend since the fourth quarter of last year. Pre-sale housing prices have also experienced a slight decline, suggesting a market-wide adjustment.
Shifting Buyer-Seller Dynamics
The shift in market conditions has significantly impacted the buyer-seller relationship. Previously, securing a viewing appointment was challenging. Now, prospective buyers are greeted with attentive service, including refreshments and personalized attention.
Challenges for Homebuyers
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Tighter Loan Restrictions: The Central Bank's seventh wave of credit controls has made it more difficult for individuals to secure home loans, particularly affecting those seeking to upgrade or purchase a second property.
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Increased Down Payment Requirements: Limited loan amounts are requiring buyers to increase their down payments, impacting affordability.
Statistical Insights
Transaction Volume Declines
Across Taiwan's six major metropolitan areas, transaction volumes have fallen by 27% compared to the same period last year. The most significant declines were observed in Tainan (36.6%), Kaohsiung (35.7%), and New Taipei City (32.2%).
Price Adjustments in Pre-Sale Housing
The average price of pre-sale homes in Taiwan peaked in January at NT$560,000 per ping (a Taiwanese unit of area). By April, this figure had fallen to NT$536,000 per ping, indicating a slight downward trend.
Case Study: Price Reduction in Southern Taiwan
A notable case involves a development in Southern Taiwan's Shan-Hua district. Due to slow sales (only 10+ units sold out of 100+), the developer is offering existing customers a refund of NT$50,000 per ping, up to a total of NT$2 million per unit. They plan to re-launch the project at a lower price point.
The Impending Housing Delivery Wave
Record-Breaking Completion Numbers
This year marks the largest housing delivery wave in Taiwan's history, with an estimated 144,000 units slated for completion. This significant increase in supply coincides with stricter lending conditions, creating potential challenges for buyers.
Potential Issues for Buyers
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Inability to Secure Financing: Buyers who purchased pre-sale units may find it difficult to obtain the necessary financing due to stricter loan-to-value ratios.
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Funding Shortfalls: Buyers may face significant funding gaps if they cannot secure the originally anticipated loan amounts.
Case Study: Impact of Loan Restrictions
One example is a buyer who purchased a pre-sale unit in Banqiao six years ago. They anticipated being able to borrow 70-80% of the property's value. However, due to the Central Bank's restrictions, they are now only eligible for a 50% loan. Moreover, due to property value increases, the apartment now qualifies as a luxury property which means they can only secure a 30% loan. This has created a funding gap of over NT$20 million.
Alternative Financing Options
Facing financing difficulties, some buyers are exploring alternative options such as loans from non-bank financial institutions or private lenders.
Implications and Opportunities
Transition to a Buyer's Market
The combination of increased housing supply and tighter lending conditions is shifting the market towards a buyer's market. This creates opportunities for buyers to negotiate more favorable prices and terms.
Advice for Prospective Buyers
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Assess Financial Capacity: Accurately assess your financial capacity and borrowing power before making any purchasing decisions.
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Explore Options: Explore different financing options and compare offers from various lenders.
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Negotiate Aggressively: Take advantage of the current market conditions to negotiate favorable prices and terms.
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Focus on Completed Units: Consider purchasing completed units, as they allow for a more accurate assessment of the property and its value.
Conclusion
While the current market presents challenges, it also offers opportunities for informed and prepared buyers. By carefully assessing their financial situation and taking advantage of the shifting market dynamics, buyers can potentially secure a desirable property at a favorable price.
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