Saturday, February 26, 2011

Taiwan Housing Bubble, Price to Income Ratio at 11

China Times: Warning signs of housing bubble
According to the results of a survey conducted by the Taiwan Real Estate Research Center, housing prices in Taipei City have soared 73 percent over the past five years, but the average household income has risen by only 1.2 percent.

As a result, the housing price-to-income ratio in the city has increased to 11. Worldwide, the ratio is lower, except in Hong Kong where it is 11.4.


jesse said...

I had thought a higher P/I ratio could be supported in some countries due to above-inflation wage gains but Taiwan is turning out to be more developed world than I thought.

GG said...

A higher P/I ratio can certainly be supported in some places. But I can't see it being due to income gains, unless the banks are lending ahead of said income. It only seems supportable in situations where people are willing to pay a paradise tax and/or they are willing to bring money in from elsewhere and/or the majority rent and only a minority of the very wealthy are competing on outright purchases.

Ray Barrett said...

How is it lower in the "world", when clearly it's 12 in Vancouver?

GG said...

Ray, the article you cited is using averages. The article I cited, actually it's not clear what they are citing, but it implies averages from the other paragraphs. Averages can be skewed, badly, from measure to measure. If you really want to compare two different places you need to find medians for all the measures and then divide. Otherwise you are mixing in income distributions.

I suspect Vancouver's median multiple isn't as grim as the average multiple (although they are both unsustainable). The recent rash of 20 million plus homes getting sold, for example, really threw the average price up but only tweaked the median.