Yang Chih-peng writes to Lai Ching-te again: NT$3.45 trillion of room remains in mortgage lending, urges end to lending restrictions

Yang Chih-peng, former chairman of the Taichung City Building Management Association, wrote to President Lai Ching-te again on November 11, asking the central bank to cancel its seventh round of lending restrictions. This is his fourth letter. He said the controls have now lasted more than 2 years and 2 months, while the originally planned period was 2 years. Yang said he had earlier offered the president advice on real estate and loan policy on three occasions, and the Presidential Office, the Executive Yuan, and agencies including the central bank, the Financial Supervisory Commission, the Ministry of Finance and the Ministry of the Interior had all replied formally.

Yang said that, according to central bank and Financial Supervisory Commission statistics for the end of September, deposits at domestic banks stood at NT$55.6 trillion, up by more than NT$14 trillion in two years. Real estate loans at all banks account for 34.02% of total lending, the lowest in more than 20 years. As for the 30% cap set in Article 72-2 of the Banking Act, he calculated that the current 23.79% is 6.21% below the cap, equivalent to NT$3.45 trillion in funds.

Yang's 3 demands, in order, are to review the price threshold for high-priced housing, which has not been revised for many years; to raise the loan-to-value ratio on developers' unsold units to 50% so it can offset land and construction loans; and to fully cancel the seventh round of lending restrictions. He said none of these 3 demands has been granted so far.

Yang listed 3 major central bank policy mistakes, in order: relying on lagging indicators, forcing developers to build, and not considering costs and actual conditions. He said the central bank mainly looks at the number of units with occupancy permits and the number of buildings with first ownership registration and transfers, which are lagging indicators; the ping of building land transferred and the number of units with building permits issued are the leading indicators.

Yang noted that, to prevent developers from hoarding land, the central bank had in earlier years required that "land acquired must be developed within 18 months," a rule that was in force for 2 years. He argued that when the economy is weak, developers have no choice but to start construction, causing an oversupply of housing and making the problem of unsold units worse. He also criticized the central bank for refusing to ease lending restrictions on the grounds that home prices had risen too much, without factoring in higher labor, material and tax costs, looking only at the figures on paper in actual-price registration (sold prices), and overlooking that developers have been cutting prices in disguise by offering free renovations, furniture and appliances.