Revision to Targeted Prudential Measures on Real Estate Lending

I. At the meeting today, the Executive Directors of the CBC made several amendments to the Regulations Governing Home Mortgage Loans and Land Loans Extended by Financial Institutions (hereafter the Regulations), effective from August 14, 2015:

(1) Revising the scope of the designated Specific Areas by removing two districts in New Taipei City, namely Bali and Yingge, and four districts in Taoyuan City, namely Taoyuan, Luzhu, Zhongli and Guishan.

(2) Raising the loan-to-value (LTV) ratio ceiling on housing loans taken out by corporate legal entities and those taken out for high-value housing or third (or more) home purchases by natural persons to 60%, up from 50%.

II. Today’s revision is based on the following assessment:

1. Since the CBC introduced targeted macro-prudential measures on the real estate sector in June 2010, banks’ concentration on mortgage loans has improved and mortgage lending has shown steady growth. Moreover, the LTV ratios on loans for homes in the Specific Areas and for high-value housing have both declined. This indicates banks have effectively exercised prudent management of real estate-associated credit risk, helping to sustain financial stability.

2. As taxation schemes on property ownership were adjusted and the consolidated land and housing sales tax is set to take effect on January 1, 2016, speculative demand has weakened and growth in property transactions has moderated, with owner-occupants the primary buyers.

3. In addition, the government has continued with housing policy efforts, which, combined with the aforementioned macro-prudential measures, are conducive to sound development of the housing market.

III.Despite the above amendments, stricter internal rules of financial institutions shall apply if they are formulated to address credit risk concerns.

Looking forward, the CBC will continue to monitor banks' management of real estate-associated credit risk and the enforcement results of targeted macro-prudential measures, and undertake appropriate policy actions to ensure financial stability.