Realistically, can most foreigners afford to buy homes in Taiwan and how?

Business Money
81

[quote=“Rotalsnart”]

Nevertheless, having the title of the house in both names could give an extra layer of legal protection (for example against a sole-title-holding spouse disposing of a house and hiding the proceeds before a divorce), and also probably a more persuasively advantageous position in divorce settlement negotiations or litigation.[/quote]

The best thing is to have both names on the title deeds. A couple of years ago a middle age woman was ranting in the news about her husband selling behind her back 2 houses that she helped to pay for. The husband took the money, bought a bigger house, divorced her and invited his mistress (really young mistress) to live with him. The law couldn’t do anything about it. No agency or bureau informed her about the sales because the husband’s name was the only name in the title deeds. Here the government really is lax about this issue. Later ‘someone’ burned the new house down. People can only suspect the ex-wife but they don’t have proof or evidence.

82

Doesn’t it kind of go without saying that house appreciation is in fact, for the house? :unamused: Anyway, the simple choice people face is to put a down payment on a home and make payments for 30 years, eventually owning the thing. Or, using that down payment money to start an investment fund, and add to it over time with the monthly savings from the difference between renting vs owning.

Just as a super basic example, assumptions:
100,000$ down payment
500,000$ initial house value
1000$ savings a month for the renter
Using 50 years of historical return data for North America:

  • Person A who bought the house owns it in outright in 30 years. The 500,000$ USD house they own is now worth about 1,250,000 $

  • Person B who put 100,000$ USD in a 60/40 stock bond portfolio, and added 1000 a month for 30 years now has about 2,500,000 $

Now obviously this is just a super basic North American example that ignores many factors. Everybody would have different results depending on what housing market they are in, what age they purchased the house at, what effective tax bracket they are in at the end of the mortgage, what interest rates they got for the life of the mortgage, how much they paid in property taxes and maintenance costs, the difference in the rent / own ratio in their area, and many other things.

It doesn’t apply to everybody, but for the vast majority of home owners, they are paying a lot of extra money for the sense of security of owning their home. As far as who’s better off in retirement, investors will almost always win that one. For many people, that “sense of security” costs over a million dollars.

83

I agree with that EXCEPT we aren’t talking about the typical returns in the US for the life of the mortgage. We are specifically talking about Taiwanese real estate for the last 5 or so years (since the housing bust thread started).

84

There’s the theoretical market and then there’s things that happen. In the theoretical market Taiwan property prices should never have been this high compared to incomes and population growth for the last 10 years, but that’s what happens when people
game the market. On the other hand, QE juiced stock returns in the US to an incredible degree over the last
few years, what could have been a market in the doldrums for years became something that roared back to life as the ‘real’ economy spluttered along.

85

[quote=“BrentGolf”]…

Just as a super basic example, assumptions:
100,000$ down payment
500,000$ initial house value
.[/quote]

In other words, as I wrote before (and I am hope you were kidding that you didn’t understand) people can live forever so saving NT$3,000,000 for a downpayment is feasible on a $30,000 a month Taiwanese salary. :sunglasses:

86

They publish regularly how long you’d have to forego food and shelter and use your salary all to pay for housing. I think it took what 14 years, 22 years, for an average citizen on an average salary under those conditions to buy a house? I’ll look it up…

We foreigners are not usually making average salaries, but above average. However, as said, we still need a push, as cases here show.

In her last call, my Mom asked if I would like her to sell the house and send me the money so I can buy something nice here. Note: I am sole beneficiary in case of her demise. I said no. First of all, her huge house in a private entrance fancy residential compound, though would sell for a nice sum there, cannot buy a parking space here in Taiwan. Second, she needs a roof. Third, with the job market instability and economic gloomy forecasts here, one never knows when one may have to take off… suddenly. Hence, for a foreigner, renting is still a better proposition, more choices, more flexibility. I understand the need to have “a place of me own”, it is a basic need. But sometimes we do not get what we want. If we are wise enough, we should get what is good for us.

EDIT:
Found this from 2012

[quote]Average workers seeking to get a house in Taipei City need to go without food and water for 13.7 years, according to the latest real estate survey released by the Construction and Planning Agency (CPA) yesterday. …

Mortgage burden rates for Taipei and New Taipei stood at 46 and 38 percent, respectively.
[/quote]
chinapost.com.tw/business/as … -ratio.htm

From BBC, also 2012

[quote]Having lived in rented flats all her life, recently married Taipei native Chiang Ming-yun, dreams of buying her own home.

“When I was growing up, we had to move several times because the landlords wanted to sell the places we were living in,” says Mrs Chiang, an office worker.

“At one place, my mother had spent a lot of time creating a garden outside, but then we were forced to move.”

But she and her husband, who make what is considered a good combined salary of 90,000 New Taiwan dollars (NT$) ($3,100; £1,906) a month, are starting to realise it would be very difficult for them to buy a home.

Average prices, even for older flats in the suburbs, are about $345,000.

“We would have to not spend any money on entertainment or eating out, not get sick and hope our parents also stay healthy, and most importantly, not have kids, and make sure we keep our jobs,” Ms Chiang says.

Owning a home is the dream of many in Taiwan, but that dream is becoming unattainable for some, as speculative buying has driven prices to unaffordable levels.

This has become a big problem as young people are putting off starting a family - exacerbating the already low birth rate - and many are growing increasingly resentful of this symptom of the widening wealth gap.
…
Data collected by Taiwan’s major property developer, Cathay Real Estate, shows average housing prices on the island rose by 34%, with Taipei’s prices jumping by 50%, in the past four years, despite the economic downturn.
…
The average home in Taipei now costs about $700,000 - 14 times that of average annual wages, so many adults, including couples married with children, continue to live with their parents or in-laws.
…
In June last year the government began implementing a luxury tax to control speculation. People who sell property they do not live in within one year of purchase must pay 15% of the sales price and 10% if they sell within two years.

Transactions have since dropped by about 30% in Taipei, but prices have barely fallen.

“It’s because investors are holding onto the property to avoid paying the tax. And they are refusing to sell low. So many of the apartments are sitting empty,” says Andy Huang, manager of research for Yung Ching Realty Group, one of Taiwan’s biggest real estate agency chains.

“They don’t even care to rent them out. They just let them sit empty until they can make a profit selling it.”

An estimated 1.5 million residential units in Taiwan are unoccupied, or 20% of the total. Many are believed to have been purchased by investors.
[/quote]
bbc.com/news/business-20779609

Nothing new that we didn’t already know.

87

I’ve heard that sentiment expressed this way: You can’t always get what you want. But if you try sometime, you just might find, you get what you need.

88

Where on earth did the BBC get those numbers? The average housing unit price of USD700,000 in Taipei might have been right at the time of the report, in 2012, but if that equates to only 14 times the average annual wage in Taiwan, then It must be a different Taiwan from the one I’ve been living in all these years. According to that figure, the average Taiwan wage is USD50,000 per annum, which is NTD1.5 million, or NTD125,000 per month. Huh?

89

Maybe it is 1.5 million a year, which still is a bit higher than average.

90

[quote]Just as a super basic example, assumptions:
100,000$ down payment
500,000$ initial house value
1000$ savings a month for the renter
Using 50 years of historical return data for North America:

  • Person A who bought the house owns it in outright in 30 years. The 500,000$ USD house they own is now worth about 1,250,000 $

  • Person B who put 100,000$ USD in a 60/40 stock bond portfolio, and added 1000 a month for 30 years now has about 2,500,000 $
    [/quote]

I realise it is a basic example but is the housing price assumption correct? i.e. North American homes have only increased in value 2.5 times over the last 30 years? I’m not familiar with US property, but it looks pretty low.

91

One of the (many) elephants in the room here is the lack of basic protection for renters in the open market. Sure your landlord may be a good guy, but I’ve also heard cases of friends being told: “My nephew is coming back from the UK next week. Please leave.” There seems to be very little awareness among the Taiwanese I’ve met that this is a problem. The faith in property ownership in Taiwan is not one I share. But it appears mighty large, as is the conviction that owners can do nearly whatever they want.

Do any of you see any indicators that this situation might change?

Guy

92

Sign a contract and the “my son is coming back” thing isn’t a problem.

93

The problem could probably be solved by passing a law stipulating that in special high demand zones a person sould only own one residence which would have to be their primary residence. Otherwise they’d have to sell within a minimum time or face public auction with their purchase price being the opening bid.

94

[quote=“afterspivak”]One of the (many) elephants in the room here is the lack of basic protection for renters in the open market. Sure your landlord may be a good guy, but I’ve also heard cases of friends being told: “My nephew is coming back from the UK next week. Please leave.” There seems to be very little awareness among the Taiwanese I’ve met that this is a problem. The faith in property ownership in Taiwan is not one I share. But it appears mighty large, as is the conviction that owners can do nearly whatever they want.

Do any of you see any indicators that this situation might change?

Guy[/quote]

Not a chance. And don’t forget that if you are old or chronically ill, you’re likely to be booted out also. Nobody wants a tenant to croak in their apartment.

95

Legal protection for tenants is fairly good. Rental agreements can be enforced.

96

Do you mean the same rough time frame where US stocks have risen 212% from their lows? Does it really matter what real estate market we are talking about? It’s true Taiwan is slightly better in the past 6 years, but in the end it still gets absolutely dwarfed by stock returns, and that’s for your cherry picked time frame. Regardless of the time frame though, the same basic fact remains. Investing in a balanced portfolio has always vastly out performed real estate. I’m not a fortune teller, but I’d say it’s a good bet that the next 200 years won’t be a whole lot different than the last 200 years. The smart money is always on the stock market and dividend re-investment.

It’s not an assumption, I only used real data for my example. It’s true, real estate has just edged out inflation over the last 30 years. Obviously different markets have done better than others, but it’s the national average that matters. Just like some stocks have done better than others, but the index average is 8%+. So yeah, real estate has been as terrible an investment in the last 30 years as it’s always been. I agree with you on one thing though. A lot of people don’t know this… But what they don’t know, really can hurt them. Despite the opportunity costs, people will still line up to put massive portions of their net worth into an illiquid asset that hardly appreciates more than the inflation rate. :loco:

97

[quote=“Hokwongwei”]Instead of the speculative threads on whether and when housing prices will drop, I’ve found myself wondering lately how exactly foreign workers in TW could afford property without being a hedge fund manager. My in-laws are wonderful and have never given me pressure to buy a home (I would tell them in no uncertain terms that I have zero intention of doing so) but I recognize I’m the minority here. Crunching the numbers…

Let’s assume a foreign office worker has an average paycheck of 55,000+ over the months and years he/she is saving up for a down payment on a home. If the worker manages to save half of that each month (which is really kind of impressive in my book), it would translate to NT$330,000 of savings a year, meaning three years just to accumulate NT$1m. If the down payment is 20% of the cost of the home, that could only buy a parking spot in Taipei. So it would take six years of saving at that salary level to get NT$2m (so NT$10m) which could buy a very very small home in Taipei or something reasonable elsewhere.
[/quote]

I don’t think these numbers are right.

For starters, my understanding is that foreigners need a 30% down-payment before the banks will lend them the rest.

For seconds, you’ve neglected the appreciation of house prices in Taipei (where I live), which has a doubling rate of around five years at the moment. This means that your down-payment is a constantly moving target.

My apartment cost my landlord just shy of ten million when I moved in almost five years ago. It’s worth almost twenty million now. If I had wanted to buy my place and (assuming constant salary) begun saving 600k a year to meet the 3 million down-payment target, I’d now only have half of the down-payment required on my now-20-million dollar concrete shithole.

Obviously, we all know we’re in a bubble. But we’ve been saying the bubble’s going to burst for at least five years now (my house was overpriced by any sane measure of value when I first moved in!) and it hasn’t. With the influx of Chinese money and the preference for the Taiwanese to cut their own balls off with a rusty razor rather than have any kind of sale which might involve selling at a loss (or hell even just breaking even) I can’t see an end yet to this bubble.

Do you mean the same rough time frame where US stocks have risen 212% from their lows? Does it really matter what real estate market we are talking about? It’s true Taiwan is slightly better in the past 6 years, but in the end it still gets absolutely dwarfed by stock returns, and that’s for your cherry picked time frame. Regardless of the time frame though, the same basic fact remains. Investing in a balanced portfolio has always vastly out performed real estate. I’m not a fortune teller, but I’d say it’s a good bet that the next 200 years won’t be a whole lot different than the last 200 years. The smart money is always on the stock market and dividend re-investment.
[/quote]

I really need to contact you sometime soon about your fund.

98

Well the appreciation phase seems
to be over now , but that doesn’t help people to buy as you said.
They kept the bubble going for years and years as they have a captive market and control all the strings such as tax, interest rates etc along with tonnes of rich older people with money to play with. Its pretty extraordinary given the lack of population growth and real demand how they could pull this off but they did. I guess the last arrow in the bow they will try to shoot is Chinese immigration…I doubt that will happen though according to the political winds.

99

That’s what I also think.
It’s already starting with retirees from HK moving here in order to escape the price madness imposed by chinese investors in HK. If President Ma plays it nice, those investors will be soon spreading to taiwan and chinese immigration on its way to repopulate Taiwan :smiley:

I don’t see that real estate bubble bursting anytime soon…

100

The locals won’t welcome large scale Chinese immigration, they don’t care about HKers but mainlanders…different attitude, giving them Work rights, Taiwan health insurance won’t be popular. anyway Taiwan’s property prices are already dropping.