Housing-industry support measures fail at building confidence

Agovernment effort to boost Taiwan's lagging housing construction sector and lift domestic demand has met with a mixed response. Many analysts question its effectiveness in reviving the island's depressed property market.

Central Bank of China (CBC) governor Perng Fai-nan and Finance Minister Paul Chiu Cheng-hsiung, perhaps hoping to impart some New Year's cheer for the property market, announced on December 30 a set of 'measures to revitalise investment in the construction industry.' The package allocated NT$150 billion (about HK$36.06 billion) in postal savings funds into low-interest loans for those buying new housing units or their first homes.

Also included was a two-year hiatus on both national housing construction projects and a scheme to build low-cost public housing by state-owned Taiwan Sugar.

The most evident perk to prospective homebuyers in the package was a provision that any buyer of a new home can this year secure up to $2.5 million in financing at a guaranteed 5.9 per cent annual interest for up to 20 years.

Mr Chiu said the new package would prompt consumers to purchase existing units through the low-interest financing and tax deduction and 'make the economy more vibrant' by helping the 'locomotive' construction industry with its strong backward linkages in sectors from building materials to appliances.

Mr Chiu added that early action to rescue the housing construction and property sector could avoid a costly bailout later, citing the 60 trillion yen (about HK$4.12 trillion) price tag for Japan's bailout of its construction sector.