Are you buying a house here or there?

While a majority of the residential buildings designed by the architect THYRDRAIL seems to like would appear bland to a Dane, they are nevertheless a major improvement on the toilet tile concrete caves most of us live in here. Too bad they are so few and far between.

Taiwan is one of the most overpriced, overated property markets in the world.

Some facts:

  1. 85% of all Taiwanese already own their own homes.

  2. vacancy rates reach 15-20% for some areas of Taiwan.

  3. Many factories, companies, individuals have relocated to China leaving more vacancies.

Morris Chang of Taiwan Semiconductor came out and said the Taiwanese average yearly wage is likely to stay at its current level for years to come as Taiwan has reached a kind of economic developmental plateau.

Talk to vendors on the street even in seemingly successful business areas of Taiwan. They will all tell you that BUSINESS IS WAY DOWN and it is hard to make a lving compared to 10 years ago.

It isnt just Taipei. Prices in I-Lan county are also VERY high.

I would like to own a home here but it is out of my reach even though I earn a decent salary.

My impression is that the few wealthy people who control most of the property coming on to the market have always manipulated the situation creating an artificial market with high prices.

After all, they are loaded with cash and property, why do they need to lower their prices for anyone? Then there is also the attitude that the Taiwan economy will miraculously return to its glory days boom days so I guess I just wait it out.

Morris Chang just bought himself a 200p penthouse - really nice roof top garden with a fantastic view of the city from the livingroom. I can’t remember exactly, but I think he paid about NT200,000,000.
Seems he has lots of confidence in the property market!

quote:
Originally posted by chung: Morris Chang just bought himself a 200p penthouse - really nice roof top garden with a fantastic view of the city from the livingroom. I can't remember exactly, but I think he paid about NT200,000,000. Seems he has lots of confidence in the property market!

I wonder what a few PRC SCUD missiles test fired across the Taiwan Straits would do to the value of his penthouse…

Seems he has lots of confidence in the property market!

You could also say some people have more money than sense.

Woooow…that many people in Taiwan own homes?? That’s waaaay higher than home ownership in the States. Why do they keep building residential buildings then. New complexes are constantly being advertised in Taiwanese magazines.

Ya, I do think those buildings are a big improvement over bathroom-tile covered buildings. But I think some of those buildings look even nicer than some of the buildings built in the States, like in NYC. We have tons of bland, ugly, brown brick buildings or concrete buildings. I think mediocrity in architecture is universal. I wonder if there’s a forum in NYC for foreigners/expats who criticize the bland, mediocre architecture of some of the buildings in NY.

Ya, I read the same article about Morris Chang, but he said things can improve with major bureacratic, market reform, etc. He said Taiwan’s per capita is $13k about. But CIA lists as $17k. Then The Economist lists as US$13,925 (2000) and US$22,646 (2000), at PPP. Who’s an economist who can explain what PPP is??

quote:
Originally posted by Rascal: [b]Seems he has lots of confidence in the property market![/b]

You could also say some people have more money than sense.


When you have money, you don’t need sense, dude.

Does anyone know of the luxury condominium complex that’s designed by Kenzo Tange currently planned for construction in Taipei I think? It’s 4 or 5 towers with big garden and cost US$3-12 million supposedly. Pictures were posted in skyscraper.com last year, but nobody has heard about it since.

I don’t thnk it makes much financial sense to buy a house in Taiwan.

I live in a place in Neihu, that my landlord wants 15,000,000 NT for and I pay 20,000 NT rent per month. It is in a beautiful location not far from DaHu lake with mountain views. It would be impossible to buy a place like this. The mortgage payments alone after borrowing my 2,000,000 at 2% and the rest at 6% would be about 70,000 NT per month.

Places like mine are not impossible to find in Taiwan, obviously. With a little persistance and flexibility about where you want to live they abound.

However, the smart money would be to buy a place in your home country where it almost certainly will appreciate over time. As much as it is a hassle to look after from afar, it’s still worth it for the capital gain, and peace of mind. Buying at the right end of the market can sometimes help with ensuring good tenants the type that pay off your mortgage for you. And it’s the easiest way to leverage 50,000 dollars into 300,000 going.

I am not an economist, but:

PPP stands for Purchasing Power Parity.

This means that the calculation takes living costs and general price levels into account and is supposed to make international comparisions easier. Food is cheap in China, but expensive in Denmark. The difference in GDP per capita therefore decreases, when PPP is used instead of an exchange rated GDP figure.

However, there are many ways of calculating PPP, so PPP figures should be used with caution. Hope this helps.

Purchasing a property in Taiwan makes sense if you are planning on staying here for a long time, realistic minimum of ten years. At that point the likely drop in property values can be more than offset by the value paid in rent in the same period.

I bought a property in Neihu several years ago at a good price, and i am still approx 50% ahead on value ignoring any mortgage payments made, which are about the same as renting in the same area, i pay approx NT 19,000 for a three bedroom aprtment also close to DaHu.

If you are only planning to stay for a short time, or are buying for investment purposes then your home country is generally the best bet, as there are no problems about legal ownership.
The other option but obviously more risky is to consider the property hotspots around the world and invest in one of them.

I have to be honest and say that i do not believe those ownership rates to be true, or at least not for the whole of Taiwan. Whilst it maybe true for the more rural areas it is certainly doubtful for Taipei.

Thanks Holg. I get it, but still not sure what to believe in when there’s a million stats and numbers out there. Then I see per capita income based on GDP, then GNP, and of course there’s the PPP. Well, whatever. Economics isn’t my field so I’m not losing any sleep over it!!

Forgot: PPP is a way of calculating GDP, usually per capita.

The one i like the most is the big mac index, which is a comparision of big mac prices worldwide :

here

Has anyone bought a place back home, but are paying it off from here? btw for others, that Big Mac index might be easier to find here [URL=http://www.oanda.com/products/bigmac/bigmac.shtml] Taiwan is bloody expensive mind you

Buying a 6 million NT dollar property in Taiwan.

Assume: 7% longterm mortgage rate and borrowing of 4 million dollars. The deposit you provide from your own savings.

On a 20 year mortgage the property will cost a total of 9,441,926 NT not including stamp duty, rates, transaction fees or property maintenance. The property would then be likely to be valued at less than the original purchase price given the rate of devaluation in Taiwan of property values.

The monthly mortgage repayments would be: 31,008NT

Alternatively you could pay rent on the same property for 20 years. If you rented the same place for 20 rears at 20,000 NT per month. The whole experience would cost you 4,800,000. There would be no transaction fees or property maintenance or rates. If you were then to invest your deposit at 7% with interest reinvestment the same 2,000,000 would be worth 8,000,000 in 20 years time.

To compare the stratergies:

Buying: cost: 9,441,926 + House (4 to 5 million)

Renting: cost: 4,800,000 + portfolio (8,000,000)

In addition to this the renter could reinvest the 4,641,926 NT dollars that they didn’t spend on buying the house. Assuming they invested fairly conservatively they could at least hope to improve on that amount by about a third. In the end the renter has spent 4,800,000 but saved and invested 6,189,234 + 8,000,000 = 14,189,234

The buyer had spent 9,441,926 and saved between 4 and 5 million depending on the house valuation after 20 years.

These calculations are based on the ANZ mortgage calculator. Without capital gain in a properties value and the disparity between rental prices and mortgage repayment rates buying a house in Taiwan is financial suicide.

Hmmm…sounds like a plan, although I didn’t understand all of the financial jargon since I’ve never bought a home before.

All I know is, if property prices are as low as they are for the past few years, wouldn’t that be a good time to buy? Exactly how much lower can it get? And 20 years is a very long time. You’re assuming value will continue to depreciate, but you don’t really know do you?

I think I’d rather own my home rather than rent and risk the value depreciation that might or might not occur over 20 years.

Gee…Thyrdrail. Go right ahead. Maybe you can ask mommy and daddy to lend you the big bucks.

I agree that it doesn’t seem like a good idea to buy a house in Taiwan. If you want to buy a house it seems wiser to buy one in your own country and rent it out and use that money to pay the rent here.

My plan is to buy a house in the part of New Zealand that I want to live. My thinking is that if the prices in that area really rise then I’ll still be able to afford to buy a new hosue there by selling the old one.

Bri

Fox, your assumptions are to say the least wrong.

If you assume a mortgage rate of 7% then the savings rate will be at best 2 - 3% not the 7% you are suggesting. Also mortgages here in Taiwan have the first 2 miliion loan at a subsideised rate, currently max of 3.15%, in places less.

Secondly, if it is in theory the same property then you would not be renting for the value mentioned, that is financial suicide for the owner. My wife and i own a flat where the mortgage is 19000 NT and the rentable value is in the region of 28000 NT. No one in their right mind unless the property is really old and rundown therefore also paid for, would rent for less than cost.

If i work on a more realistic example, then for the total cost of my mortgage over its full term is 6840000 NT. Assuming that there is no rise or fall in valuation - which is conservative bearing in mind the current 50% increase we currently have - on the original purchase price of 4000000 NT then the cost to the buyer is 6840000 - 4000000 being 2840000.
At the rate of rent being asked and assumed obtained - this also assumes no rent increase in 20 years, is this likely - then this equates to between 101 and 102 months of rent or approx 8.5 years.

This means that in 8.5 years the renter will have paid what the buyer will spend in twenty years.

You have also forgotten the most important element, after the mortgage is complete then the cost to the buyer is ZERO, but the renter is still paying the same every month, and will do until he stops renting.

If buying a property generally was such financial bad sense as you are trying to make out then why do most reasonably developed countries have such large property markets ?

Traveller, I think what everyone in this room is saying is that it’s not worth it to buy a property in Taiwan because prices are too high and the market seems to be in a slump with 15-20% vacancy (in which case I’d think prices would be dropping). And Fox doesn’t think the property will appreciate as much as if you bought in your home country, even though he can’t predict what the status of the real estate market will be in 20 years. It could well be very positive.

I think if you are staying long term like 10-20 years in Taiwan, you should definitely consider buying. It’s more economically feasible. And who wants to be 40-50 something and renting??? In Chinese society, it’s more highly regarded to own your own home.

And if you don’t want to get bogged down in big mortgage payments, do what Fox suggested. Borrow from your folks!!

I’m hoping that a few people might reply to the 2nd part of the question. Has anyone bought a place from home, and are (were) paying it off from here. I’m reckon this is the angle I’ll take, but would love to find out people’s experiences with it. After all, people must be saving for something yeah. Cheers Amos.