In 2025, Taiwan recorded only 261,000 residential property transfers, down 25% year-on-year — the third-lowest figure since records began in 1991. At the same time, outstanding home mortgage loans hit a new peak of NT$11.6 trillion, with 2.25 million people carrying mortgages. The non-performing loan ratio dropped to a record low of 0.07%.
Three things that should not happen together are unfolding: transaction volume collapse, record loan balances, and historically low default rates.
Freezing Trading Does Not Mean Falling Prices
According to the Financial Supervisory Commission (FSC) data released on May 5, banks' real estate loan ratio fell to 25.03%, about 5 percentage points below the statutory ceiling of 30%, translating into hundreds of billions of NT dollars in idle lending capacity. The last time this ratio was seen was May 2012. Now only five banks have ratios above 27%, none exceeding 28%. The days of near-29% ratios and severe queuing for mortgages are gone. Banks are not short of funds — borrowers are scarce.
Yet mortgage balance annual growth remained at 4.42%, indicating ongoing home purchases and loan originations with high on-time repayment. Homebuying remains a collective mindset in Taiwan, though less frenzied than before.
Construction Loans Shrink, Developers Retreat
On the development side, sentiment has chilled. Construction loans outstanding fell to NT$3.9 trillion by end-March, down NT$30.3 billion month-on-month, with annual growth at just 1.47%. Tightened central bank curbs on speculative buying, restricted construction financing, and rising building costs have crushed developers' appetite to start new projects. Supply is shrinking, and existing homeowners are unwilling to sell at a loss due to ultra-low holding costs.
Taiwan's property holding tax is less than 0.1% of market value, compared to 1%-3% in the U.S. and 0.4%-1% in Japan. With supply contracting and demand persisting, prices are unlikely to decline.
New Youth Loan Time Bomb: Grace Period Ends, Payments Jump
The first batch of borrowers under the New Youth Housing Loan (version 1.0) will face principal-plus-interest repayment starting in the second half of 2026. The grace period's expiry will push monthly payments sharply higher. Economist Wang Po-ta, cited by Taipao News, warned that substituting time for structure could lead to "intergenerational debt transfer," further destabilizing the market.
Version 2.0 of the program is expected to be finalized by end-June, with the current scheme expiring at end-July. However, loan origination volumes at state-owned banks under the program hit a record low in 2025, suggesting limited takers.
Eight Years of Cooling Measures: Who Got Hit?
Over eight years, Taiwan implemented seven rounds of credit controls and two special audits. Transactions indeed froze — 261,000 units was the third-lowest ever. Speculators either exited or cashed out. But mortgage balances keep rising, non-performing loan ratios keep falling, and owner-occupiers haven't disappeared — they just find buying more painful.
Banks have trillions in lending capacity, but they screen borrowers strictly: clean credit history and adequate income-to-debt ratio. First-time buyers struggle to qualify, and many divert savings to the stock market. The FSC data also revealed that New Youth loans are excluded from the calculation of Article 72-2 of the Banking Act, pulling down banks' reported residential loan figures. Combined with the central bank's tightening, the growth rate of housing and construction loans lags deposit growth, dragging the ratio downward.
Money hasn't vanished — it just stayed out of real estate. It flowed into stocks, with the Taiwan stock market repeatedly hitting new highs. Eight years of housing cooling ended up cooling only owner-occupiers.
Three Takeaways: don't assume price drop from volume plunge; new youth borrowers face payment jump; banks have money but lending depends on income ratio
Real estate will not collapse; it will gradually push those without income growth out of prime areas.