Been back in Australia for a few years now and miss many items in Taiwan - one thing i miss is the competition in the marketplace. Anyway, mortgage rates are increasing in Australia and have steadily increased for the last 6 months and now an average mortgage in Australia is around 6.75% or so. I notice they are still considerably cheaper in Taiwan.
My Taiwanese wife has kept her Taiwanese nationality - so from that, is it possible to get a mortgage from a Taiwanese bank (with their cheap interest) and use it to build or buy a house in Australia.
I realise that currency conversions may be an issue over the lifetime of a mortgage, but if i got a mortgage to build in Australia, then build a house to sell, and therefore pay it out within a year, then currency fluctuations may not be as much of an issue.
Would it be better to form a taiwanese company that is focussed on international property development? Would that work, or could a private citizen get such a loan/mortgage?
I seriously doubt it. What happens when you default on the loan? It’s bad enough for a bank when they have to foreclose on their security interest and get deeper into the real property business, which is NOT what they want to do – taking over, repairing, repainting, marketing and trying to sell crappy old abandoned houses. But they sure as hell don’t want to be forced to reposses some crappy old house on the other side of the world.
Here is my irresponsible suggestion for your arbitrage would be
If you/ your wife have property/building in Taiwan, remortgage it with some Taiwan bank and then take that money to pay your mortgage in OZ.
And of course you’d monitor the currency trend from time to time and make sure you have enough cash at hand, in case AUD would suddenly fall out of some unknown reason.
actually that is something worth looking at. we do own a 3 bedroom apartment outright in Yong He (Taipei) so i wonder if we could do that.
Something to ponder…
We also own two other properties in Australia, but are looking at other ways we can cheaply build up our portfolio without paying the high interest rates (which went up again today too).
What rate are you paying on your Taiwan property? Just curious.
We bought in Taipei last year and are paying about 1.92% (based on Taiwan’s floating “prime” rate plus 1%), but my wife negotiated with them last week and they offered floating rate plus .78% (for the remainder of our 20 year term), which she tells me comes to about 1.7% presently. To get that rate they will require her to buy life insurance at a one-time cost of NT$24,000, which is ridiculous, but after year one we should save considerably by taking the offer.
Taiwan’s rate is not lower than some mortgage rates available in North America. If you don’t lock in your mortgage in North America (which is crazy to do when the rates are still rather low unless you are really really really risk adverse), you can get mortgage rates of 1.75 percent with some institutions. Of course, to get a preferential rate such as this, you need to put down a 30% plus down payment.
In other words, it seems like a huge waste of time to try and do it out of country.
I’m not talking about North America - I’m talking about Australia.
Our rates (in Australia) are currently sitting at 7.5% variable and about 9% fixed. This is why i am asking about rates in Taiwan. They are much cheaper in Taiwan compared to Australia.
Please do not make comparisons to the American market to the Australian market.
We own our Taipei property outright so do not have any mortgage or any money owing on it. It was a wedding gift from my wife’s parent’s and is ours. We consider it our Taipei home for our twice yearly visits back to Taiwan.
But the figures you quote above are very warming. I just have to figure out how i can get mortgages in Taiwan for investment places in Australia. I’d be happy to start a Taiwanese based development company if need be.
We are currently paying 7.5% variable in Australia (read Australia - not North America), so any saving on mortgages will be great and very beneficial.
Once upon a time I got a personal loan from my local US bank for the express purpose of buying an investment property in Jakarta. The loan was completely unsecured. I would think if you have a bank relationship in Taiwan, there is a good possibility you will be able to do this. Downside is that interest on a personal loan is higher than on a mortgage, but perhaps here in Taiwan it is not that much higher. This is actually very attractive business from the bank’s perspective. In a way, they are charging personal loan rates on a mortgage-like risk.
That said, there is a lot of talk that Australian real estate is a bubble on the cusp of popping. Rising interest rates, and floating-rate mortgages will do that. Frankly, I wouldn’t lend money on Aussie real estate right now, but some bank just might.
I agree with Opihiman on the current state of Australian property. The government has the rates up for a reason, and the government seems intent on stemming the flow of hot Chinese money into the market. Didn’t they recently put in place new restrictions on non-citizens/non-permanent residents owning property? Something to the effect that they cannot buy a place above a certain value, it must be for personal use and it must be sold when the non-Australian leaves the country? If I were Australian and were looking at buying, I think I’d rent and keep my powder dry in the AUD money markets for a couple more years.
I have been looking at a way of doing the same thing in the US for over a year and my conclusion was that the only options are remortgaging or general bank loan, both of which are as expensive or more expensive than your current Australian rate.
It is still very tempting because lately we have been semi-idly looking at houses in Taichung around TW$20m. In Taichung city that buys a 1500 sq ft apartment with a couple of shitty fixtures and wonky doorframes. In Oregon it would currently buy a beautiful 6000+ sq ft house with land and a view with cash to spare.
I am still thinking of some way to do it under 5%, maybe through some kind of business loan.
Yeah thats what i thought - maybe look at starting an Investment/Development company and get business loans for places. I should point out, the intention for my original post is not to buy a place to live in but to buy a place to invest in.
I’m aware of the bubble talk in aussie real etsate. The other investment places i have are in the lower end of the market and not in the major cities. The reason i bought these ones as i feel that there is always poor people that require the cheaper housing rentals, plus being out of Sydney, Melbourne and Brisbane, my tennants are those people who are escaping the major cities due to the rising cost of living. The bbubble talk is in the cities - not the regionals.
I must have done something right as my current investment places are positive geared.
But i do want to expand my portfolio with the same type of properties. So i may also explore the possibility in starting a Taiwanese based development company. Use our existing apartment in Taipei as collateral.
I would be concerned about currency exchange risk, IE over the last 2 years, the AU$ has gone from 30 to the NT$ to 20 to the NT$ back up to 30, and then now to 26 point something.
There’s no financial logic in what you just wrote, just self-justification. Assumptions-
What worked before will work now (most people just ride the wave of trends). Has ANYBODY lost money investing in property in Australia over the last 10 years…I doubt it. Will everbody lose money in medium term on their investments in real state in Australia from 2005-2010, very possibly.
Poor people will be able to afford my place at the rate that will pay my mortgage
Out of the way places will hold up better and there is no bubble in those places (I have seen that NOT to be the case in many situations). You should also take into account employment in that area, plus transport links and costs if oil goes up.
As Mr He said, FX changes alone could kill your investment, they could also work to your advantage. However it’s just gambling. Although one thing for sure, there is a huge bubble in Australian real estate right now. It’s easy to tell because of the affordability index. Rates will probably go up more and exports of commodities will slow or bust once China pulls back on its crazy construction boom. So there is much more downside risk than upside.
The scheme you are using is one that Europeans used to buy houses in their own and neigbouring countries i.e. Latvians, Lithuanians etc. They lost evertyhing when their currencies devalued. It’s is also similar to what many Chinese, Japanese, Taiwanese and Asians are probably doing in Australia right now. In general it’s a good idea due to the low interest rates in Taiwan but it needs those rates to continue and also assumes massive currency risk.
Finally why are people escaping the cities…high costs. What happens when the cost of property comes down, central areas become more popular again! Ultimately it depends on employment opportunities for your tenants or if the local government will cover their rental costs to a certain level.
'Revealed: The home loan that could save you a fortune By Nick Gardner From: The Sunday Telegraph May 22, 2010 10:29PM HOMEBUYERS are to be offered never-ending mortgages in a bid to overcome Australia’s affordability crisis.
ING Direct, Australia’s fifth largest lender, is preparing to sell loans that have no fixed term and no requirement to repay any capital along the way.
At current rates, the interest-only loans would cut repayments on a $300,000 mortgage by $5000 a year.
Repayments would be kept to a minimum, allowing borrowers to benefit from capital growth in their property.
“People are needlessly being denied the chance to buy a property while prices spiral rapidly out of their reach” ING Direct CEO Don Koch said.’
Big trouble coming down the line…it’s like every country is doomed to repeat the same mistakes across the world even with such huge exposure of the US and European property market crashes. Notice there is no analysis of the possible negative impact? Notice who are the people quoted in the article, real estate and finance people.
It has been 13 years since this thread started and Taiwan mortgage rates are still relatively low compared to other countries. Any further advice on how to enjoy Taiwan’s lending rate and using the cash to buy property abroad?
I just checked Aussie mortgage rates and they are now around 6%. What happened to the OP’s @gg1965 plan to arbitrage interest rates and (maybe?) take a mortgage out against their 3 bdrm in Yonghe? Did the currencies vs the AUD go for or against them in the past decade?
I asked Chatgpt to describe the volatility and this is what she said:
The chart depicts the historical exchange rates between the Australian Dollar (AUD) and the Taiwan Dollar (TWD) over a period of approximately 5 years. During this period, the exchange rate has experienced significant volatility. From the initial data point, there is a sharp decline, indicating a period where the AUD depreciated substantially against the TWD. Following this, there is a recovery with the AUD appreciating before entering a phase characterized by large fluctuations within a range.
These fluctuations suggest a period of uncertainty and instability, which may be due to various economic, political, or market factors affecting the currencies. Overall, while there have been periods of both appreciation and depreciation, the AUD/TWD exchange rate has not shown a clear long-term trend in one direction and remains within a volatile range.
The final part of the chart, leading up to the present, shows continued volatility without a significant breakout from the established range. This lack of a definitive trend suggests that neither currency has consistently strengthened or weakened against the other over the long term, but rather that the relationship has been dynamic and influenced by various short-term factors.
Then I asked if @gg1965 did take out a TWD loan when the AUD depreciated - they would have done pretty well, right? NOTE the time frame of the OP is 2010 not 2019 (just before COVID)
Yes, your assessment is correct. If you took out a loan in TWD to buy an Australian property at the beginning of the period shown in the chart, especially at the point when the AUD sharply depreciated, you would have been able to convert your TWD loan into more AUD than initially anticipated due to the favorable exchange rate. Consequently, as the AUD recovered and appreciated in value relative to the TWD, the value of your Australian property in terms of TWD would have increased. If you were then to sell the property and convert the AUD back to TWD to repay the loan, you would likely benefit from the currency exchange gain, assuming that the property’s value in AUD did not decrease during that period. This kind of currency movement can be advantageous for foreign property investments and debt repayments in the invested currency.
Here is my irresponsible suggestion for your arbitrage would be
