Buying an apartment in Taiwan

Legal Legal - Real Estate & Housing
1

I can’t get over how much it costs to buy a place here. If you’ve bought a home recently, in the city, how did you find it? Through an agent? What can we expect to pay in interest? How many years? How large a downpayment? I keep insisting that there must be foreclosures, or second homes that people just want to sell in a hurry. Where would I find these places? I’ve already thought about looking outside the city, Dong Hu, Xi Zhi, but my husband is adamant that he’s not interested in those areas. I might be able to sell him on something in Xindian, but I want to keep in mind that at some point, the children will attend one of the int’l schools and I don’t want transportation to be too inconvenient.

All advice appreciated.

2

My wife and I found a house last summer. We managed to go through the owner and only had to hire a broker to fill out the paper work.

Agents were not very helpful. They saw a foreigner come through the door and thought there was no way he was going to buy a house.

We paid the a 2.9 million deposit. (By choice), and secured a 2.5 million loan at a fixed rate of 2.5%. Which is standard for a first time home owner in Taipei.

Donghu is shit by the way. Flooded two times in less than a year. Kang Ning Rd is not bad. Higer ground and flashier pads. Much quieter too. + the prices ar rising quickly so it’s a good investment. After the MRT opens in 2006-7…it should be great around here.

Ski

3

Here’s what I’ve learned. Won’t swear to it as I’m not a real-estate or finance professional:

We bought last summer after researching the market for four years. It turned out to have been a good time to buy because the SARS scare and international events had unsettled buyers and temporarily stalled the Taipei real estate market.

It’s come roaring back. Now is not a good time to buy. Prices are escalating. Taipei metro’s economy and the stock market are doing well. Steel prices are skyrocketing, driving construction costs and hence the cost of real estate up. (China is sucking up steel and other commodities at a record rate this year.) It’s also an election year so the government is juicing up the economy as much as possible. Because the rust-provinces of south/central Taiwan are on the skids, laid-off Taiwanese workers from the south are flocking to Taipei where the jobs still are, driving up demand for housing further.

Taipei county may be a good bet in general because my understanding is some parts will be incorporated into Taipei city, increasing amenities and thus property values.

Many of the norms of the real estate market in the U.S. don’t seem to apply here to any great extent other than location, location, location. Distress sales, fixer-uppers, motivated owners – none of these seemed to be real factors here. Chinese property owners seemed perfectly content to sit on property and only sell at market highs.

We did find bank foreclosure sales at good prices but the locations and buildings were uniformly rotten.

Our good fortune came as a result of finding a building owner who was motivated to close out the last remaining units of a good apartment complex last summer when SARS and war in Iraq really seemed to cast a pall over the future in everyone’s mind. Finding an apartment with a good floor plan was also very challenging here. Most Taipei apartment floor plans have real deficiencies which make me question whether professional architects are typically involved in planning them.

The only principle which seems to be in a buyer’s favor here and the one which we exploited is the heightened tendency to engage in superstitious group-think here. Wait for a time when nearly everyone is convinced unlucky times have arrived, the gods are displeased, the economy may be poised to fall off a SARS cliff in the very near future. That’s about the only thing which will soften up a Taiwan seller. Taxi drivers are a particularly good barometer as to when this auspicious time to buy has arrived. When they start telling you that it’s not a good time to buy and only a fool would be thinking about getting into real estate, then you know the herd is moving in the right direction finally and it’s time to close a deal.

Conversely, when they’re telling you real estate is looking good, don’t expect to pay anything less than top dollar. Just spend that time finding those rare buildings with a good floor plan, built by a good construction company (research this, this is important) and with good management.

4

Some good advice here.

We bought new.

20% downpayment, plus 80% mortgage.

Negotiate a good rate with the mortgage before you settle.

We bought at a low point, though not the lowpoint. We managed to buy at a good discount to what had been paid only five years before.

Timing is everything here.

Also, downpayments on second hand houses are typically 30% or more. New houses can be as low as 10%.

Typical house purchasing norms in UK don’t apply here, either.

Overall, property is hot this year, but not everywhere in Taipei County. Diligence and patience will pay off here, too.

Don’t overload the debt either when purchasing.

Yields on home rentals are depressing so buy to let isn’t really so viable here, (i’d love to know if I"m wrong on that one! I would love to rent out my place, but the yield is negative right now for us, unless we remortgage do any of you buy to let in Taiwan?)

Kenneth

5

Both Ken & ski offer sound advice.

My wife and I bought just over two years ago; one of the last remaining units in a new complex in Jingmei in which we had rented the year before.

Dealing directly with the development company, Core Pacific, we had a bit of an advantage because they wanted to unload the property as quick as possible to be able to move their sales staff on to their next big project in Jungho.

Funny enough, they were more than willing to come down on the price of the apartment, but wouldn’t budge on the price of the parking space. Guess that’s because they were selling a lot of the parking to outsiders who didn’t actually live in the complex.

Anyhow, they offered 3-year interest-free financing on what would have been a $2 million deposit, payable in monthly instalments. So rather than having to lay out a substantial amount of money at the outset, that money could stay in our accounts earning interest. Definitely a benefit.

The balance (another 3.5 million) was financed through a mortgage with a local bank. When we bought, the government was offering first-time homebuyer incentives with floating-interest guaranted not to exceed 2.7%. The lowest we’ve seen it so far is 1.7% and the highest has been 2.4%. The standard is a twenty-year agreement, but they had no problem accomadating us when we told them that we’d rather pay it off in ten.

I think that if you do your research, you’ll find that property is expensive compared to what you might get for the same price back home, but not unaffordable considering what you would be paying if you were renting. I know a lot of locals who go for the standard “minimum deposit/maximum mortgage length” and they are still paying substantially less than if they were renting. And at the end of the day, the property is yours.

Good luck,
CK

6

If you are planning to stay here for a long time I would suggest not buying an apartment but buy a place where you also own the land. One of those 3 story jobs…

7

One problem with that is that price tag. 6 million vs. 12 million (probably more). But at the same time if you have the money it is a better investment. Assuming the market doesn’t go down.

My father in law spent 16 million for his place in the late 80’s. Today, he couldn’t sell it for 10 million. Do your homework before you buy!

Ski

8

[quote=“citizen k”] When we bought, the government was offering first-time homebuyer incentives with floating-interest guaranted not to exceed 2.7%. The lowest we’ve seen it so far is 1.7% and the highest has been 2.4%. The standard is a twenty-year agreement, but they had no problem accomadating us when we told them that we’d rather pay it off in ten.
[/quote]
Does this offer apply to foreigners holding ARCs? or is it just for ROC nationals? Can an ARC holder obtain a bank loan to begin with?

9

One problem with that is that price tag. 6 million vs. 12 million (probably more). But at the same time if you have the money it is a better investment. Assuming the market doesn’t go down.

My father in law spent 16 million for his place in the late 80’s. Today, he couldn’t sell it for 10 million. Do your homework before you buy!

Ski[/quote]

You can get a rundown one outside the big cities for NT$2m+. Then spend the savings on getting the place made livable. Up on the hill where I live, they sell for NT$4m but will need a fair bit of work before becoming comfortable.

10

Thanks everyone, for the very helpful feedback.

DB, this is something I’ve thought about but I just have such a hard time selling it to the husband.

Have you seen any of these three story places for 12 million? What area?

11

Reply to Incubus,

ROC Nationals only, unfortunately. Same goes for a mortgage; I think you’d be extremely lucky to find a local bank that would trust a foreigner as the sole signer of a mortgage. :cry:

CK

12

[quote=“braxtonhicks”]Thanks everyone, for the very helpful feedback.

DB, this is something I’ve thought about but I just have such a hard time selling it to the husband.[/quote]

I have two places here. An apartment and a place that comes with land. The nice thing about having one of those 3 story places is that you can rent out the bottom floor. If you ever decide to move out of Taiwan, that would be nice supplemental income. It all depends how much you want to spend.

Picking a place in a good location is the key.

13

Xizi, a private community at the the end of donghu. White horse villa also. A little more than 12 million. Same area.

Up on the mountain in Neihu. (three finger mountain I think). There are some older houses selling pretty cheap. Real houses. However I think they are sliding down the mountain thats why they are so cheap.

Good luck

14

. . . which is why my wife and I decided not to buy in Taiwan. We thought about it when our landlord threatened to sell our apt out from under our feet. We feel our apt is very nice for a place in Taipei (we’ve got trees outside every window, etc.), so we started speaking to the owner about a purchase and began looking at comparables but felt very uncomfortable about spending so much dough for such a small old place in Taipei.

If one is committed to Taipei our place comes out very well in the location, location, location test, but when one takes a broader view it sucks. We’re hoping to live in the states some day, in a real house with a yard. So if one considers location, location, location from a global perspective our place doesn’t score so well. A house in California would be much more desirable. We plan to be there in a few years and had thought it might make sense to buy here in the meantime as an investment and either sell or turn it to a rental when we leave. But eventually we decided it’s not worth the hassle (and the cost) and will keep putting our dough in the bank and the stock market instead, as we save up for the US house. If you’re here for the longer-term, though, maybe that doesn’t apply to you.

Definitely buy a place that you like in an area that you like. I made the mistake of not doing that when I bought my first house, in California. I bought a house that was such a super-cheap bargain, fixer-upper that I ignored the location, location, location rule and ignored the fact that it was in a lousy neighborhood. DO NOT assume you will only be there for a few years, or may move out and rent it, etc. Assume instead that you will be stuck living in the house for 10 years, because worst case scenario you may have to, and ask yourself is this a place I would be happy in for that long?

15

What MT said was right on the mark.

I think that in terms of buying a place here in Taiwan, how long you actually plan to stay here is also important.

16

Agreed, my wife and i bought ours some 8 years ago with the knowledge we would be around for some time. Whilst we could rent for slightly less in the same area, the difference at the end would be less than the residual value in the house, even allowing for a further 50% fall in prices. In that scenario it made no sense no to purchase, as things stand today we would still make a slight profit if we sold, based on the original purchase price, and a healthy profit based on outstanding mortgage

17

Look at it this way. You can stay for ten years and rent the whole time.

You can stay for ten years and buy a house.

If you rent, you throw your money away.
If you buy and the value increases…bonus when you sell it.
If you buy and the price drops…you still get back more than if you only rented. Assuming your morgate is equvalent to what you would pay in rent.

Ski

18

Ten years, yes, that makes sense. Two or three or four years, maybe not.

19

[quote=“ski”]Look at it this way. You can stay for ten years and rent the whole time.

You can stay for ten youeas and buy a house.

If you rent, you throw your money away.
If you buy and the value increases…bonus when you sell it.
If you buy and the price drops…you still get back more than if you only rented. Assuminh your morgate is equvalent to what you would pay in rent.

Ski[/quote]

I am planning to sell my apartment of 10 years next year and the scenario that ski outlines is how it is going to turn out for me.

20

[quote]If you rent, you throw your money away.
If you buy and the value increases…bonus when you sell it.
If you buy and the price drops…you still get back more than if you only rented. Assuminh your morgate is equvalent to what you would pay in rent. [/quote]
Run that by me again?

This coming from the guy who also wrote[quote]My father in law spent 16 million for his place in the late 80’s. Today, he couldn’t sell it for 10 million.[/quote]

Let’s say you put down 25% of the purchase price, MT$4million on a NT$16million house. Your mortgage is 12mill, and after 15 years you’ve paid off about a third.

So now you owe 8million on a house worth 10. Your NT$4 million deposit has turned into 2million. What a great return on an investment!

I bought a house in the UK in 1990. Interest rates on home loans peaked at around 15% not long after. Like hundreds of thousands of others my repayments became unaffordable, and I joined the ranks of people with houses they couldn’t pay for.

Guess what happens to house prices when there are entire streets of people desperate to get out? Prices drop massively, and some people not only lose all the money they put down as a deposit, they find themselves still in debt after foreclosure.

Ownership of your home is not necessarily smart or desirable from anything other than an emotional perspective. It CAN be a great investment in a rising market, but if the only thing supporting house price inflation is all the people trying to buy while houses are still affordable the bubble can easily burst.

If ownership costs the same as renting your ‘profit’ when you sell is purely determined by house price fluctuations. You trade flexibility and access to your capital for the right to fix your own toilet. Why bother?

And what happens when the mainland gets fed up waiting and the reunification missiles start flying?