Taiwan Central Bank Split on Using Rates to Rein in Housing Market

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Taiwan's central bank should consider adjusting interest rates to rein in the housing market, Deputy Governor Chen Nan-kuang said, in contrast with earlier comments from Governor Yang Chin-long, who suggested rates won't be used to influence property prices.

Writing in the January edition of The Taiwan Banker magazine, Chen said loose monetary policy is a major reason for rising house prices and interest rates should be included as one of the policy tools to tame prices.

The combination of interest rates and other prudential policies can help stabilize Taiwan's financial environment and macro economy, he said. The article was Chen's personal opinion, rather than the central bank's official position.

Governor Yang said in November that authorities will use selective credit controls instead of interest rates, to rein in the housing market. The central bank has kept borrowing costs unchanged at a record low since 2020, although some economists are predicting rate hikes this year. Yang also said last month a rate increase was likely in 2022.

Chen said the central bank should assess its policies and take necessary action as early as possible when dealing with house prices. It should stop using “high housing prices can't be solved by a single department” as an excuse, he said.

Taiwan's benchmark 10-year government bond yield rose 3.8 basis points as of 12:56 p.m. Tuesday to 0.78%, the highest since April 2019, as investors began pricing in rate hikes in recent weeks.

Housing prices in Taiwan have gained more than 160% over the past 20 years, much higher than the 45% gain in South Korea and 64% in the U.S. respectively, according to Chen. Surging home prices aggravate the uneven distribution of wealth in Taiwan more than in the U.S., as property accounts for a large part of households' total wealth, he said.