Some time ago my mother-in-law started urging me to buy a house. She did so by relating the Chinese folk tale Five Sons (五子登科), from which derive the five modern “necessities of life”: silver (money), wife, children, house, and car.
Without doubt, housing has been the most expensive and fraught of the five necessities. First off, the weight of traditional values brings pressure to purchase a residence. Renting just won’t do. As a result, Taiwan’s home ownership rate in 2017 was 87%, one of the highest in the world, according to Global Property Guide.
Another factor is the house-price-to-income ratio in Taipei, which Taiwan Ratings Corp. puts at 15:1. This represents the number of years the average person needs to save without spending on anything else to buy a house of median value. It is more expensive than London or New York – but not as bad as Hong Kong’s 18:1.
Added to which – and this is a personal observation – the housing stock is generally old, badly maintained, and as real-estate agent-speak puts it, “modest” or ”unpretentious.” Basically, the median price for two new-built houses in, say, Utah will cost the same as a small, decrepit apartment in Taipei that was built in the 1960s.
Like acquaintances in a similar position, we are searching for homes ever further from the city center, since the house-price-to-income ratio in New Taipei is nearer 13:1. Ideally, we hug close to MRT stops for ease of access to our downtown workplaces. If not, we would be forced to embrace hour-long-plus commutes from satellite towns or mega suburbs like fast-growing Taoyuan.
Even then, it’s not easy to buy because the market is inflated. House prices rose sharply from the 1990s to around 2014, dipped for a while, and are now leveling off. House owners, understandably reluctant to accept the new reality, mark up their properties by as much as 20-30% over the market rate.
Real-estate agent Angus Ke at the Renai-Guangfu office of H&B Housing has watched the housing market rise and fall over the last few decades. He characterizes the current situation as “stable,” attributable to a combination of government policy, an anemic economy, low wages, and a declining population.
“Rich people will always buy houses,” he says, because they are good investments. “As for wages increasing, that’s a problem for the government and bosses.”
Ke reports that business is brisk and cites two main reasons why. First, the leveling off of house prices means sellers are no longer holding out for more money, “so they sell.” Second, buyers aren’t waiting for house prices to drop any further, “so they buy.”
Negotiations can only begin after a mediation contract known as ”woxuan” (斡旋) has been signed with the real-estate agent representing the property. Direct talks are a no-go. Usually the contract will entail putting up NT$100,000 as a sign of “good faith.” The money goes into escrow, and if you buy the house it goes toward the cost. If you renege on the agreement, however, the sum goes to the owner (or if the owner backs out, it goes to the would-be buyer).
What you’re not always told (“you have to ask”) is that there’s a ”yaoyue shu” (要約書) document backed by the force of law that does not involve paying down a deposit, but has the identical effect of ensuring that both parties proceed in good faith. To concentrate minds, a time limit on negotiations of about a month is imposed.
In practice, the system works fairly well. Negotiations typically take place with the real-estate agents doing their level best to reach an amicable agreement between the two opposing parties, generally over copious amounts of tea.
House surveys are relatively rare in Taiwan, as most people buy apartments and figure that if their place has a problem, it’s one shared with everyone else in the complex. Also, the house buyer tends to rely on the mortgage valuation to identify major problems. If the house falls down or floods soon after the sale, then the seller and real-estate agent are contractually responsible for costs.
The operating models for real-estate agents vary widely. Some work totally on commission, whereas others are paid a basic salary, with added commission income when they make a sale. Some agents are franchise operations, which may mean paying commission both to the franchiser and the franchisee after you have bought your house. So, buyer beware.
“My advice to buyers is don’t worry so much about the price, just find the house you like,” says Ke.
It’s good advice, but hasn’t helped my house hunting so far. We got a survey on one house we liked and it turned out to have serious structural problems. At another place, the owner was in no hurry to sell and wanted to hold out for a higher price. A third option turned out to be the scene of a bitter battle between the seller and neighbor about whether the property could be redeveloped or not.
We will carry on regardless, taking to heart another piece of advice from the mother-in-law: “Be patient.”