Taiwanese solution to soaring house prices: don't have kids  

Posted by Big Gav in , ,

The Age has an interesting article on house prices and population growth - Taiwanese solution to soaring house prices: don't have kids.

In Taipei the other day, a crane drove up to the front of the Parliament building. It lowered a man sitting in a plastic container shaped like a house, and suspended him in the air in a protest against the high price of real estate. Through a microphone, he urged onlookers to rise up against high housing prices, declaring: ''People without homes, slaves to property, stand up!'' ...

This matters because housing is not just an asset like shares or bonds. It is where we live. It's natural for investors to prefer the security of bricks and mortar. But as governments throughout the region are discovering, it is also natural for people to want to own a home - and to turn against governments that allow prices to soar out of their reach. In Taiwan, the costs have become particularly serious, as we shall see. Their would-be home buyers - ''snails without shells'' as they call themselves - have reacted by scrapping the other big expense facing young couples: children.

At home, the Rudd government last week reversed its 2008 liberalisation of foreign investment rules on real estate, and set up a unit to ensure the rules are obeyed. It also set up a joint working party with the states to ask why housing prices have soared out of reach. But that will work only if it tackles the single biggest cause: the tax-driven growth of rental investors, whose borrowing has grown 30-fold in 20 years, squeezing out home owners. ...

Taiwan has become rich very fast, largely by inching its way into a central role in global IT and communications manufacturing. This year, the International Monetary Fund estimates, its GDP per head will overtake that of its one-time colonial master, Japan. Its economy is almost as big as Australia's, and growing twice as fast. Yet its new wealth shows only fleetingly amid the grimy, cramped apartments built in earlier, poorer times.

Taiwan is in the grip of a housing crisis worse than ours. It is a rich country, but wages and most prices are roughly half the levels here - because the government, like China's, holds down the exchange rate to keep its manufacturing globally competitive. ...

Why can't they build more apartments? Because ownership of those grimy old apartment blocks is fragmented among dozens of occupants and investors. To demolish, even to upgrade, a developer must buy them all out, which is prohibitively expensive in time and money. There are classy new apartments on the urban fringe, on greenfields sites, but too few to meet the demand from occupiers and investors. So prices have soared.

So the snails save hard to buy a shell, and do without other things. That means, above all, they do without children, or with just one child. By 2008, Taiwan's fertility rate was the lowest in the world. Its women bear on average just 1.05 children over their lifetimes. The cost of housing is not the only reason, but analysts say it is the main one.

But not having children creates even bigger costs ahead. Right now, Taiwan has 6.8 people of working age for every retiree. But preschools are already closing for lack of children, and the population is set to shrink dramatically. By 2032, demographers project, Taiwan will have just 2.5 potential workers for every retiree - and by 2056, just 1.4. If nothing changes, Taiwan - like China, Japan and Korea - will slowly become economically unviable.

So far, that hasn't happened here. But if governments keep subsidising investors to outbid first home buyers and low income earners, it will. Snails want shells. Taiwan - and soon, possibly China - are showing us what else can go wrong when the price of shells soars out of the snails' reach.


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