the democratic progressive party’s power chaos as seen from the loan restriction order
2024-09-11
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in july this year, news came out in the banking circles of taiwan that the balance of mortgage loans was approaching the warning level. some homebuyers had to wait in line for banks to release loans, or choose a lower loan amount and higher interest rate. it was originally thought that this was only a minority and short-term phenomenon, but it became more and more serious. until the evening of august 21, the taiwan "central bank" held a rare temporary press conference and confirmed that it had invited 34 banks and credit cooperatives to discuss the excessive concentration of credit resources in real estate, which was not conducive to financial stability, causing overheating of real estate and further triggering a financial crisis. the so-called "loan restriction order" rumor was finally confirmed to be not just a rumor, but true.
the "loan restriction order" not only caused psychological panic among first-time homebuyers and those who were changing homes due to concerns about the inability to obtain financing, but also caused the overheated real estate market since the second half of last year to cool down rapidly; the fear of a capital chain break in the housing market has led to rumors of an impending real estate bubble; the policy, which was implemented under the banner of financial stability, has actually made the risks of volatility in the real estate and financial markets greater than before, turning it into a "loan restriction order chaos."
so, what problems did taiwan's "central bank" see that made it willing to take the risk of market fluctuations and rush to boost the housing market? everything started with the "new qing'an housing loan" policy that was hastily implemented on august 1 last year.
back in the first half of 2023, taiwan's real estate market was banned from transferring pre-sale houses, registering pre-sale houses at real prices, and tightening the real estate tax system. house hoarders will be subject to high property taxes, and a series of other measures to combat real estate speculation were launched. in addition, the global interest rate hike and weak market demand caused a stock market crash, and real estate transactions were almost dying. but the key point is that although the transaction volume of the housing market has dropped sharply, the price has not fallen, presenting a situation of "price stagnation but volume shrinkage"; that is, the transaction is quiet, but the house price has not fallen, and those who cannot afford to buy a house still cannot afford it.
at that time, the "general election" was in full swing. the democratic progressive party had been in power for eight years, but housing prices were out of control. the opposition party held high the banner of housing justice and bombarded it repeatedly, which became the weakness of the democratic progressive party in the election campaign. in order to please voters, the democratic progressive party hastily launched the "new youth security mortgage". the biggest difference from the previous youth security loan program is that the mortgage amount has been increased from nt$8 million (new taiwan dollars, the same below) to nt$10 million; the loan term has been extended from 30 years to 40 years; the initial "interest-only but not principal" grace period has been extended from 3 years to 5 years; in addition, the taiwan "central bank" has raised interest rates several times, and the new youth security loan is fully subsidized and is not affected by the interest rate increase, which has set off a rush to buy houses.
among these, the most fatal one is the increase of 2 million yuan in loan limit, which is equivalent to giving sellers a bargaining chip of 2 million yuan to raise the price, which is the biggest confidence to boost house prices. the increase of 2 million yuan in loan limit per household, the extension of repayment period and grace period, and the rush to buy have all raised the level of lending in the financial market. as of the end of june this year, the ratio of real estate loans to total loans of all banks in taiwan has risen to 37.4%, which is close to the historical high of 37.9%; it has also reached the upper limit of the "banking law" that the lending level shall not exceed 30% of assets.
in addition, if xinqingan really helps young people buy houses for their own use, there are many speculators who use fake accounts to enjoy low-interest loans or take advantage of xinqingan's mortgage discounts to rent out houses for profit. according to the ministry of finance's order to eight state-owned banks to conduct two rounds of inspections, a total of 1,575 lenders were found to have violated regulations, of which 86% were subletting for profit and 14% were fake accounts. this means that many families took the opportunity to purchase houses in the name of their adult children over the age of 18 and then rented them out for profit.
the thousands of illegal households that were found were only screened out based on high-risk factors, not the result of a household-by-household inspection; professional house hoarders and speculators have long been familiar with the logic of banks screening high-risk illegal households, and thus cleverly evaded inspections; there are probably more real violators. it can be seen from this that the disadvantaged groups who really cannot afford to buy a house not only did not benefit from the new qing'an housing loan policy and realize their housing justice, but instead suffered the bitter fruit of accelerated housing price increases, which can be said to be the harm before the benefit.
the financial industry has also been harmed, especially the eight state-owned banks that joined the xinqing'an loan program in compliance with the policy. they were lending in compliance with the policy at first, but now that the lending limit has been reached, the central bank first called them for "coffee" to remind them that the lending limit is about to be reached and they should not lend any more. later, because they caused panic among first-time homebuyers, the financial supervisory commission and the taiwan finance department instructed that those without self-occupied homes should be given priority in their loans. it was you who said that the loan should be granted, and it was you who said that the limit had been reached and that no more loans could be granted, leaving the banks at a loss.
the taiwan central bank was unprecedentedly slapped in the face by lai qingde and zhuo rongtai at the same time. in order to appease the panic of first-time homebuyers who could not get loans, including lai qingde's pointed criticism of the taiwan central bank for overreacting, the taiwan central bank had to find 22 banks to discuss the response to first-time homebuyers' mortgage loans, and opened 15 special complaint hotlines to accept people's petitions. zhuo rongtai also instructed banks and banks to adjust the loan structure independently and give priority to first-time homebuyers' loans at the taiwan executive yuan meeting. the media ridiculed that "the taiwan central bank asked the banks to hand in their papers, but the "government and the yuan" asked the "central bank" to hand in their papers first." the dpp "government and the yuan" jointly interfered with the "central bank" decision-making and infringed on the independence of the "central bank", which was bolder than the authoritarian era of the "two chiangs".
in the final analysis, if the dpp had not taken drastic measures to crack down on the housing market (a series of measures to crack down on housing speculation) in the past few years, and had not taken the wrong medicine, thinking that the new qing'an mortgage loan was a panacea for achieving housing justice, the recent "loan restriction order chaos" would not have occurred. however, in order to solve the "loan restriction order chaos", the dpp also asked the taiwan "central bank" not to treat the lesions in a hurry, and to turn a blind eye to some conditions; this is equivalent to spreading the real estate risks to the taiwan "central bank" and exposing the whole of taiwan to the vortex of the financial storm. recently, it was even reported that the dpp was planning to amend the law to relax the "heavenly rule" that real estate loans account for 30% of assets, so as to help the taiwan "central bank" get rid of the "loan restriction order", which is tantamount to drinking poison to quench thirst.
it is not difficult to dismantle the "loan restriction chaos". as long as the dpp stops writing checks for more benefits and stops taking drastic measures and taking antidotes, the risks can be reduced a lot. but is the dpp, which has enjoyed the taste of power, willing to let go?
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author ai-lin is a senior journalist in taiwan
