Abstract
There are intensive concerns about the causes of rising housing prices in Taipei. The aims of this study are twofold. The first addresses the issue of whether the low-interest-rate policy is adversely driving housing prices in the metropolitan area of Taipei. The second is to investigate if two important housing policies, luxury tax and actual price registration, help to depress the rising residential house prices. With the mega tick data of Taipei city for more than 80,000 residential house transaction records, we examined the factors influencing the actual house prices spanning the period from June 2008 through May 2014. We applied the least squares regression and the quantile regression in the model estimations for housing valuation. In addition, the megadata set is organized in time series and cross-section structures for five subdistricts and the whole Taipei city as well. The empirical results show that low mortgage rates have been the most significant factor for soaring housing prices in Taipei for the past decade. We estimate that a 1% increase in mortgage rates reduces housing prices from 5% to 17%. The actual price registration policy contributes to the decrease in housing prices by 4% to 29%. Housing policy implications are made based on our empirical findings.
Highlights
The real estate market in the Taipei metropolitan area has shown an annual increase in recent years that has exceeded a level that the general public can bear in price
Ordinary least squares (OLS) estimates, mortgage rate had a significantly negative impact on housing prices, with an increase of 13.41% for every 1% drop in mortgage interest
Θ = 0.1 and θ = 0.9 had the smallest coefficients, while the housing in between the quantiles showed increasing coefficients toward the center with θ = 0.5 showing the absolute coefficient value at −0.171, which implied a drop of 17.11% in housing prices for every 1% in mortgage rate
Summary
The real estate market in the Taipei metropolitan area has shown an annual increase in recent years that has exceeded a level that the general public can bear in price. For example, the average price per unit area in January 2009 was roughly 325,100 and it increased to an average of 676,300 by May 2014, yielding an upsurge of 108% in five years and an average annual increase of 21.6%, which was significantly higher than the average wage increase. Some people will never be able to save enough for a down payment. If they do, the monthly mortgage will result in lowering the standard of their daily lives. The policy must prevent short-term speculative purchases that lead to excessive capitalization of the real estate market. Several policies were respectively introduced, namely, the luxury tax in June 2011, the actual pricing registration in August 2012, and the integrated housing and land tax system in January 2016
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