In the four years I’ve been on this island, the price increases on most things have been incremental, and in some cases (internet cafes) have actually dropped. A candy bar goes up from 20 to 23 NT, whoah, stand back! Year after year, wages and prices seem to stay exactly the same. Quite a difference from back home in the States where the price of a soda goes up by at least a nickel every year. Can someone more informed about economics than myself explain this phenomenon?
I’ve noticed this too. Coke has gone from $NT18 to $NT20 in 5 years.
$18 to $20 in 5 years is a 2.13% rate of inflation. About what one would expect, actually quite low considering Taiwan’s growth rate has traditionally (excluding the last few recession years) been much faster than more developed economies. For example, I think China’s inflation rate is in the double digits.
Neo’s point is right.There is incremental inflation in Taiwan and that kind of an increase over 5 years is reasonable. In fact, I’d dispute the price of coke going from 18 to 20. It’s been more like 16 or 17 to 20. And that increase has occurred in the last year, which is an inflation rate of 17.6%.
Just enjoy it while it lasts.Be happy
On a compounded basis, $16 to $20 in 5 years comes out to 4.6% as the annual inflation rate.
This doesnt explain how the average salary earner (under nt$30,000/m) survives in this city given the living costs. Curious.
Living with the parents.
Why do you think 3 generations of the family all living under the same roof is the norm in Taiwan?
Inflation in the economy as a whole is caused by shortages. Shortages could be in the form of raw material shortages (such as less oil on the market, which raises the price of gas, or ‘petrol’ for you silly anglos). Shortages could also be in the form of housing shortages or even employee (workforce) shortages. These cause rents/house prices to increase as more people compete for the same living places and salaries to increase as companies find they have to offer more money to attract employees.
Taiwan really hasn’t faced any shortage of anything (although gas prices are going up worldwide, which may cause some inflation later). Taiwan has so much housing and office space that there is a glut on the market and in some cities, such as Hsinchu, there is actually housing price deflation. Taiwan has plenty of people willing to slave away mindlessly for low wages and they can always import and exploit Filipinos and Thai to keep wages down… making DPP xenophobes increasingly popular.
We’re not actually ‘lucky’ per se to have no inflation. If there were more inflation in Taiwan…
wages would rise and companies would have to treat employees better to attract and retain them (that means you too, English teachers… when is the last time you got a big raise?)
property investment would actually turn a profit and house owners and construction companies would actually have the means to design, build and maintain decent looking buildings
work requiring cheaper, low cost labor would move even faster to China and elsewhere, causing Taiwan to open up to try to attract the best and brightest professionals from around the world to help build a knowledge-based economy
In short, if we had more ‘controllable’ inflation, we’d see Taiwan actually join the ranks of the developed world.
Instead, we’re in ‘inflation purgatory’… and Taiwan stays the same, making little progress to create a better, more diverse, more liveable society.
I think sometimes inflation in the price of products is caused based on the rise in costsassociated with that product. For example if oil prices go up, then airfares or bus fares rise. Another cost involved in the price of goods are salaries of the workers. I know in the USA people get raises year after year. However, in Taiwan salaries have been rather stagnant and I heard even lower on average than they were years ago. In this way costs associated with manufacture or distribution etc, have not risen. Rents have also been stable if not slightly lower as the real estate market was down until recently. Finally, goods shold be getting cheaper in Taiwan after WTO import taxes on a lot of goods have been lowered slightly each year. Another thing to consider is that many things made in China are easier to get into Taiwan now so that should keep prices down too.
In my opinion, you should not ask why Taiwan has such little inflation, you should ask why other places have such high inflation.
Living with the parents.
Why do you think 3 generations of the family all living under the same roof is the norm in Taiwan?[/quote]
It is very far from the norm. Especially up here in Taipei. People who make NT$30,000 often supplement their income with another job. If you live outside of Taipei City, you can rent a place for NT$10,000 and live on another NT$10,000 if you are careful.
Fusion…
wages would rise and companies would have to treat employees better to attract and retain them (that means you too, English teachers… when is the last time you got a big raise?)
Why do we need a raise if the prices of everything stays pretty much the same???
property investment would actually turn a profit and house owners and construction companies would actually have the means to design, build and maintain decent looking buildings
The buildings look fine, and they function, don’t they? Who needs all that construction work?
work requiring cheaper, low cost labor would move even faster to China and elsewhere, causing Taiwan to open up to try to attract the best and brightest professionals from around the world to help build a knowledge-based economy
Exactly what does a knowledge-based economy do…out-source to India? Oh, I know they give employees raises every year while the price of everything keeps going up…they have inflation 
That’s a bit dear! My rent for a spacious two-bedroom apartment in Tainan runs me an extravagant 5,000 NT. And that’s the norm in this city.
Why is there such a glut of apartment/office space? Why do they keep constantly constructing new buildings in Taiwan when half the buildings already constructed sit empty?
My roommate and I pay NT$17,000 for 30 ping, 3 bedroom, 2 bath apartment in Taipei.
It’s easier to get financing(lower down payment and lower interest rate) for a new apartment than an older one. This is the reason that property developers can keep throwing up new buildings, because of a complete lack of fully functioning secondary property market due to gov’t incentives. There can also be problems with titling and the everpresent neighborhood pecking order.
CYA
Okami
Interesting post, Okami. I was wondering why so many older buildings in my neighborhood have been torn down (they looked fine to me, but then again, I have no experience in architecture or construction) and so many new building are being thrown up (quite loudly–outside my window–for months now.)
May I ask, by “tilting” do you mean the actual tilting or shifting of older buildings?
What do you mean by neighborhood pecking order?
And when an old, say four-story, building is torn down (and a new seven-story building is put up), how are the original occupants (owners ?) of each floor compensated?
Does someone own the land that these buildings are own? I assume my landlord owns the floor that I live on, but I don’t think he owns the whole building. Just curious and thanks.
Titling refers to ownership of the apartment and land that the apartment building is on.
Spend anytime in an older neighborhood and you will soon find a pecking order. Don’t piss off so and so, his wife will say your a slut if you don’t smile at her, go to my sister’s husband’s store, etc. By going into a new building neighborhood, you can avoid be harassed into things(think MLM) and not worry about people having the clout to bad mouth you in a way that will last forever and mark your children.
Don’t know exactly how ownership works. I heard that when you buy a property that each aparment comes with a little of the land the building is built on. New buildings often give sweetheart deals to the previous apartment holders on the new building from what I’ve heard. Someone else is going to have to answer these questions better than me.
Okami
Thanks, Okami. Good answers and good info.
My bad on the “titling” “tilting” misread.
It’s easier to get financing(lower down payment and lower interest rate) for a new apartment than an older one. This is the reason that property developers can keep throwing up new buildings, because of a complete lack of fully functioning secondary property market due to gov’t incentives. There can also be problems with titling and the everpresent neighborhood pecking order.
CYA
Okami[/quote]
Your post is misleading Okami, it is actually the banks and the construction firms that provide the incentives on the new buildings in the form of lower down payments that they supplement not the goverment.
Finally, it seems like common sense to me that they keep putting up new buildings because people want to live in a nice new places not some old run down place. What they could do instead is start refurbishing and totally remodel the outside and the inside of thise older buildings and maybe put in an elevator, etc., but then it still wouldn’t have a big parking lot etc. would it?! Maybe best to tear down those old KMT era poorly contructed ugly buildings and continue to put up more long lasting beautiful ones.