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Central bank tightens mortgage rules to cap property speculation

Central bank Governor Yang Chin-long.

Central bank Governor Yang Chin-long. (CNA photo)

The central bank on Monday said it has tightened the rules governing mortgages extended by banks, effective Tuesday, in a bid to rein in speculation in the local property market.

Central bank Governor Yang Chin-long (楊金龍) told reporters that the move to impose stricter restrictions on home mortgages is aimed at stabilizing the local financial market and help improve its health.

The government is faced with increasing criticism at a time when domestic home prices have kept rising, which has sparked an outcry from the younger generation who lament that they cannot get a foot on the housing ladder in Taiwan.

Under the new mortgage rules, the central bank has imposed a ceiling on home loans for the first home, while enterprises and other legal entities will buy at 60 percent of the home's value.

For a second home bought by enterprises and other legal entities, the central bank said, the ceiling on mortgages has been set at 50 percent. In addition, for third individual home buyers, the mortgage cap has been set at 60 percent, the central bank said.

Before the tightened rules, banks had been allowed to extend as much as they wanted to those seeking mortgages.

For high-priced luxury homes, the central bank said, the ceiling for home loans has been maintained at 60 percent of the home's value for individual homebuyers despite the new tightened rules.

According to the central bank, high-priced luxury homes refer to homes priced at more than NT$70 million (US$2.46 million) in Taipei, the most closely watched property market in Taiwan.

In New Taipei, the most populous city in the country, high-priced luxury residential property refers to homes carrying a price tag of more than NT$60 million, the central bank said, Elsewhere, high-priced luxury homes have a price tag of more than NT$40 million, the central bank added.

In addition, the central bank said that when property developers ledge homes they have built in the last five years and never sold as collateral, they will not be allowed to secure loans topping 50 percent of the property's value. Before the new rules came into being, there was no ceiling.

Last week, the Executive Yuan released a five-point plan to rein in real estate market speculation, including proposals to curb the flipping of pre-sold houses and to crack down on property transactions carried out under a company's name to reduce tax liability.