Taiwan housing prices fall 3.62% year-on-year, Taichung leads declines amid policy impact

Taiwan's real estate market is showing signs of a slowdown, with the national housing price index falling by 3.62% year-on-year in the fourth quarter of last year. The index stood at 145.52, down from its peak of 150.98 in the fourth quarter of 2024, according to the Ministry of the Interior's real estate information platform.

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Whether it's the Ministry of the Interior's housing price index or the Sinyi Realty price index, both show phenomena of housing price consolidation or slight pullback. The main reason is policy guidance to cool down the real estate market, coupled with significant price increases over the past period. When potential sellers encounter a cautious market, they are willing to lower prices to facilitate a transaction.

While Taipei, New Taipei, Taoyuan, and Kaohsiung saw slight quarterly increases, suggesting a potential bottoming out in the third quarter, the overall trend indicates a market correction. Taichung recorded the most significant annual decline, with its housing price index dropping by 6.65%. Kaohsiung followed with a 4.91% decrease, and Tainan saw a 4.23% fall. In contrast, the declines in the northern cities of Taipei and Taoyuan were more modest, with Taipei's annual drop being only 0.4%.

Industry experts attribute this price moderation primarily to government policies designed to curb speculation and cool the overheated market. These measures include the seventh round of selective credit controls, restrictions on private entities purchasing residential properties, limitations on pre-sale property resales, and the "hoarding tax 2.0" initiative, all of which have increased the costs associated with buying and holding property.

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The power of the seventh round of selective credit control is immense, almost driving down housing prices in major metropolitan areas. Coupled with the implementation of the 'Average Land Law' amendment, which restricts private entities from purchasing residences and prohibits the resale of pre-sale homes, and the 'hoarding tax 2.0', the costs of real estate transactions and even holding taxes have greatly increased.

Analysts suggest that the pressure for price reductions is higher for existing homes, particularly for second-time buyers who may need to sell their first property quickly to secure higher loan-to-value ratios. However, with market controls potentially easing in 2026, the downward pressure on housing prices might lessen. The market has been in a downturn for over a year, with overall transaction volume remaining at the bottom.

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Because most homebuyers need loans, and existing homes are in the 'front row' of the 'Golden Dragon Tsunami,' the pressure to lower prices is higher; especially for those buying a second home, they must sell their first home within the deadline to obtain a higher mortgage ratio due to time pressure, becoming a heavily impacted area for price reductions. However, as the controls approach their end, the probability of gradually loosening real estate control measures in 2026 is high, and the pressure for price correction is expected to ease.