Central bank could tighten housing market in Sept. 19 meeting

Taipei, Sept. 7 (CNA) Taiwan's Central Bank could come up with more control measures for the local housing market in its upcoming quarterly policymaking meeting scheduled for Sept. 19 at a time of highflying home prices, economists said on Saturday.

Director of the Economic Forecasting Center of the Taiwan Institute of Economic Research (TIER) Gordon Sun (孫明德) said although the U.S. Federal Reserve is expected to kick off a rate cut cycle in its next policymaking meeting of Sept. 17-18 with inflation moderating and the U.S. economy slowing, Taiwan's consumer price index was still growing, topping the 2 percent alert level set by the central bank.

According to the Directorate General of Budget, Accounting and Statistics (DGBAS), Taiwan's CPI growth is expected to hit 2.17 percent in 2024, marking the third consecutive year that the index is growing above the 2 percent target.

Taiwan's gross domestic product (GDP) is forecast to grow 3.90 percent in 2024, up from 1.28 percent in 2023.

In addition, the local home market remained hot with mortgages extended by banks on the rise.

On the back of the government's latest mortgage program to help young people buy homes by providing subsidies on interest payments, mortgages extended by Taiwanese banks accounted for 37.4 percent of their total lending at the end of June, which has come closer to a historic level of 37.9 percent.

"Even if the Fed cuts interest rates this time, Taiwan's central bank will unnecessarily follow suit," Sun said.

"I expect the local central bank will continue to tighten its monetary policy. A rate hike or an increase in required deposit reserve ratio is likely," Sun said. "In addition, more selective credit control is also possible to rein in the home market."

In June, the central bank left its key interest rates unchanged but raised the required deposit reserve ratio, which is the proportion of deposits regulators require banks to hold in reserve and not in loans, by 25 basis points.

In addition, the central bank also imposed the sixth round of selective credit control in June by lowering the loan to value ratio, the percentage of mortgages to the property value, for an individual's second home in certain areas from 70 percent to 60 percent in Taipei, New Taipei, Taoyuan, Taichung, Tainan, Kaohsiung cities, Hsinchu City and County.

Echoing Sun, Liu Pei-chen (劉佩真), a researcher at TIER's Taiwan Industry Economics Database, said it's possible that Taiwan will have a seventh round of selective credit control on the home market.

In addition to the seven cities and one county targeted by the sixth round of selective credit control, Liu said, other areas also saw a booming home market at a time when contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) has plans to build facilities, in places like Chiayi, where the chipmaker will build advanced IC assembly plants.

Liu said it is possible for the central bank to add targeted areas in its new selective credit control or cut the value to loan ratio further.

Since late August, the central bank has required banks to submit year long proposals to lower their ratios of mortgages to total loans.