Skyrocketing home prices in Taiwan leave young buyers struggling to enter market

The Economist unveils in its recent article that homeownership has become an increasingly difficult dream for many young people in Taiwan, where skyrocketing property prices are putting immense pressure on younger generations. 

Since Ice Jao, a 30-year-old jewelry seller, married two years ago, her mother has been urging her to buy a house. Jao currently rents a small flat about the size of two parking spaces on the outskirts of Taipei, paying $425 per month. She lives there with her husband and two cats. However, her parents believe that "only a house you own can truly be a home," according to Jao. Despite this, she is hesitant to become a "housing slave"—a term used for young buyers who feel burdened by expensive mortgages.

Taiwan’s younger generation is not exaggerating when they refer to homeownership as a heavy burden. Property prices on the island are extremely high. In Taipei, the median house price is 16 times the median income, which is a higher ratio than cities like New York (9.8), London (14), and Seoul (13). The situation is only slightly better outside the capital. The United Nations deems a housing price-to-income ratio of 3 as affordable, but Taiwan's national average is 11. Even in its most affordable city, Keelung, the ratio stands at 6.5. In the second quarter of 2024, the average Taiwanese household spent nearly half of their disposable income on mortgage payments, with residents of Taipei spending more than 70 per cent.

Taiwan’s government has long encouraged homeownership, reflecting traditional Chinese beliefs that owning land signifies wealth and security, says Chang Chin-oh, a retired academic. “Everyone thinks, ‘I must buy, or else I’m a failure,’” adds Chen Taiyuan, a Taipei real estate agent who has run for parliament advocating for housing policy reform. As a result, nearly 85 per cent of Taiwanese households own their homes, which has proven beneficial for older generations: average home prices in Taipei have tripled since 2000, according to one index.

However, today’s buyers are unlikely to see the same gains. Taiwan’s population is declining, and foreign investment in its property market is shrinking, which suggests that house prices could drop. 

The government has done little to curb such behavior. Property owners who hold four or more units face higher taxes, but the amounts are minimal. Taxes are based on government-assessed land and building values that are detached from market prices and are generally undervalued, as the methods used for calculation have remained unchanged for decades. According to calculations from a think tank, the owner of a $900,000 house pays less in taxes than the owner of a $20,000 car.

Changing the tax system would be unpopular, so instead, the Taiwanese government has focused on offering rent subsidies and increasing social housing. In 2023, it also expanded a housing-loan program for first-time buyers, leading to a surge in both prices and sales. Many young Taiwanese engaged in “crazy panic buying,” according to Mr. Liao. As a result, the central bank had to impose stricter credit controls last year. Since then, sales have slowed. Meanwhile, young Taiwanese continue to face an unstable rental market with few protections, and last year, Taiwan's rental price index reached an all-time high.

By Naila Huseynova