New Qing'an loosens restrictions of 100 billion, will Taiwan's housing prices continue to pump? Experts warn first-time homebuyers to be cautious of falling into the "sweet trap".

The government has loosened the restrictions on the new youth housing loans, seemingly quenching the thirst of first-time buyers, but in reality, it may be a poison wrapped in sugar coating. This article analyzes the risk transfer chain behind the policy, which spans from banks, developers to young buyers, and this gamble disguised as “housing justice.” This article is a letter to the readers, and its stance is unrelated to the movement. (Background: The housing market in Taichung's coastal area has shocked many with prices “falling below 30,000,” real estate agents wryly smile: tenants can only afford a place to sleep.) (Additional background: Taiwan's housing market is exploding with prices “sky-high, transactions lying flat” with price cuts starting from 15%, will it drop again next year?) The Executive Yuan this week made a decision, announcing that starting from September 1, new youth housing loans will no longer be counted towards the loan limits set by Article 72-2 of the Banking Act. The market seemed to hear the faucet being abruptly turned on, with construction stocks generally rising. More than NT$120 billion of fresh funds are about to flow towards first-time buyers who are anxious due to “housing loan drought,” but lifting this glamorous bottle cap, what we actually smell is the fragrance of hope or the stench of crisis? A carefully designed risk transfer game To understand the ingenuity of this game, we must first return to the law known as the “real estate loan sky rule,” Article 72-2 of the Banking Act. This law stipulates that the total amount of real estate loans by banks must not exceed 30% of their total deposits. This is not a casual regulation but a core firewall established by Taiwan's financial system after enduring a storm, intended to prevent banks from concentrating too many resources in real estate and avoid triggering a systemic financial collapse when the market reverses. However, since the new youth housing policy was implemented in August 2023, this firewall has faced unprecedented pressure. The incentives of low interest rates, high amounts, and long grace periods have created enormous demand for home purchases. According to statistics from the Ministry of Finance, by August of this year, public banks had accumulated more than 13,000 cases totaling over NT$120 billion that were approved but could not be disbursed. What does this mean? It means that the public banks, which are the main force behind the new youth housing loans, are nearing the 30% red line. Banks are caught in a dilemma of “having commitments but no limits.” At this point, policymakers faced a tough choice: one is to uphold the firewall and let market mechanisms cool naturally, but this may lead to a decline in transaction volume and housing prices, triggering political pressure; the other is to create a hole in the firewall, allowing the water to flow through and relieve the immediate pressure. Ultimately, the government chose the latter. They excluded the new youth housing loans from the calculations of Article 72-2. On the surface, power has shifted from banks that “cannot lend” to first-time buyers who “can finally get loans.” But in reality, who are the real beneficiaries? First, it’s the public banks, which are freed from the dilemma of “violating the sky rule” and “offending customers.” Second, it’s the large sellers in the market, including developers and investors, who would originally need to lower prices due to market liquidity drying up, but now can maintain high prices due to the continuous demand for home purchases. Meanwhile, the government has temporarily defused the political bomb of “housing loan blockage.” So, where has the risk been transferred? The answer is obvious: to those young homebuyers who bravely rush into the market under the encouragement of the policy. They are taking on all of this, using their income for the next 30 or even 40 years to pay for the smooth operation of this system. This seemingly win-win solution is, in fact, a perfect operation that “personalizes” and “futurizes” systemic risk. The sugar coating of housing justice, the bitter medicine of generational exploitation If risk transfer is the “technique” of this policy, then the underlying “principle” touches on a deeper moral dilemma: are we indeed exploiting generations in the name of “housing justice”? Let's examine the timing of the policy's introduction. According to multiple market data, signs of cooling have already appeared in Taiwan's housing market in the second half of 2024, with some areas expected to see a price correction of 7% to 15%. The Central Bank's credit controls, combined with banks' own alertness to risks, are gradually tightening the faucet. This is a normal process of market self-regulation, allowing overheated prices to return to rational levels. However, the loosening of the new youth housing policy, precisely at this moment, acts like a powerful stimulant, directly injecting into the market's heart. It rudely interrupts this healthy cooling, reigniting the demand fire with non-market forces. It’s as if a doctor, faced with a patient with a high fever, does not give antipyretics but instead prescribes painkillers, making them feel good temporarily while the underlying condition continues to worsen. This layer of sugar-coated “helping youth” contains a bitter medicine. For those young people entering the market at the end of 2024 or early 2025, what they gain from the policy subsidies is more likely the inflated housing prices. More fatal is that this “gift” has an expiration date. When the new youth housing subsidies expire, interest rates return to normal levels, and the enormous pressure of principal and interest repayments begins after the five-year grace period ends, this group of young people who opportunistically “entered a position” at historical highs will face severe cash flow challenges. Will the risk of default become the fuse for the next social problem? This is the moral dilemma between generations. A responsible government should choose to endure the short-term pain of popping the asset bubble for the sake of long-term market health and generational fairness? Or should it choose to continuously “extend the life” of the bubble with policy tools, leaving a more fragile and larger financial structure for the next generation to bear? This time, the choice seems to lean towards the latter. We are using today’s taxpayer money (public banks are backed by the capital of the whole nation) to subsidize a group of young people to purchase overvalued assets; is this fair to those who are also young but choose not to buy a house or cannot afford one? Is this truly a “timely rain” rather than a “catalyst”? Of course, there are plenty of supportive voices in the market. They argue that this move helps those who genuinely need homes and is a timely rain against the “housing loan drought.” Officials have repeatedly emphasized that the number of applications for the new youth housing loans has fallen from their peak, and that limited lending and strengthened credit checks will not trigger speculation. However, these arguments may not withstand scrutiny. First, the line between “self-occupation” and “investment” has long been blurred in Taiwan’s real estate culture. When there is a pervasive expectation in society that land is wealth and housing prices only rise, many young people's first purchase decisions are inherently mixed with strong investment or even speculative motives. They are not afraid of having no place to live; rather, they fear that if they do not enter the market, it will be too late. The government’s strong signal that “it will not let the housing market collapse” is precisely the biggest catalyst for this speculative mentality. Therefore, claiming that this funding will only flow towards “pure self-occupation” needs to be overly naive. Second, the assertion that “the market has slowed down and is not afraid of overheating” is even more inverted in cause and effect. It is precisely because the market shows signs of healthy cooling that this strong intervention appears so dangerous. It is not raining on dry land but pouring gasoline on already cooling coals. The rise in construction stocks following the announcement is the most honest reaction to market expectations. This is not “soothing the market”; it is “provoking the market.” Finally, regarding statements about “strengthening credit checks” and other risk control measures, these are merely standard operating procedures for bank lending. They can filter out the worst credit cases but cannot guard against systemic macro risks. When the entire policy environment encourages relatively financially weak young people to enter a market at historical highs with extremely high leverage, a single case's credit review has minimal impact on preventing a potential wave of systemic defaults. When the firewall collapses: we are ushering in a future of a “policy market”. Perhaps the most far-reaching impact of this incident is not the short-term stimulus to housing prices, but the Pandora's box it opens…