The 'Ant Tribe' of Taiwan
Soaring housing prices have squeezed even average income earners out of the market and forced them to crowd into tiny apartments like ants. What can be done to ease their predicament?
The 'Ant Tribe' of TaiwanBy Rebecca Lin
From CommonWealth Magazine (vol. 467 )
She is 38-years-old, in the prime of her life, at a point where she should be pursuing her dreams.
Instead, she has given up the idea of owning her own home, or having children, and has seen her dreams crumble piece by piece. "We are demoralized and have given up hope," says Chang Wei-ting (an assumed name) after a long pause thinking how best to describe her plight.
Chang and her husband, both teachers at a junior high school in Taipei, are drifters in Taiwan's prosperous capital, unable to lay down roots in the city.
With their job security and stable incomes, it may be surprising that the couple never bought a house. After marrying when they were in their 30s, Chang and her husband looked hard for half a year, but even old apartments of no more than 70-100 square meters were selling for between NT$10 million and NT$15 million. The couple's combined annual income of NT$1.5 million (an average of NT$125,000 a month) could have supported such a purchase, but Chang and her husband were scared off because they would have had to borrow at least NT$8 million.
"I'm already almost 40 years old. A mortgage would last 20 to 30 years. For a house, I would have had to sacrifice my life and sacrifice many things," Chang says. They have waited for a better opportunity but have no idea when housing prices will become "reasonable."
Buying a House Even a Problem for Higher Income Earners
Soaring residential property prices in Taiwan, and especially the greater Taipei area, have forced even middle to high income earners to confront the dilemma of choosing between home ownership and living their lives.
According to a "home buying index" developed for the Ministry of the Interior by the Taiwan-based Chinese Society of Housing Studies, even buying an apartment in Taipei in 2009, when housing prices were relatively low following the global financial crisis, was costly compared to average income levels.
At the time, low income earners needed 17.5 years of salary to buy a house, middle income earners 14 years and high income earners 11.5 years. And buying a house now in any of Taiwan's five special municipalities (Taipei, New Taipei City, Taichung, Tainan and Kaohsiung) is sure to bring pain. (Table 1)
Being burdened with a heavy mortgage can be even more agonizing. As of 2009, low income earners needed to devote 72 percent of their income to pay an average mortgage, compared with 58 percent for middle income earners and nearly 50 percent for high income earners.
People from central or southern Taiwan, where housing prices are considerably lower than in the north, face particularly difficult circumstances when they head to Taipei to work, and are often forced to rent a tiny apartment. Over the past 10 years, the rise in Taiwan's basic wages has not come close to keeping pace with the increase in rents in Taipei and the surrounding New Taipei City, a clear indicator of the declining quality of life for this rootless "ant tribe." (Table 2)
The term "ant tribe" was coined in China to describe young graduates with low incomes who live in cramped conditions – like a colony of ants. Taiwan's "ant tribe," composed of people forced to spend half of their income to buy a house or a third of their income to rent one, and without any prospects for improving their quality of life, has extended from young adults to middle class people in their 40s and 50s. What has many people worried is not just being unable to buy a house, but also not being able to afford changing their residence.
Miss Hsiao, a lecturer at a university, has a child who is already in the third grade, but the best they can do is a 40-square-meter one-bedroom apartment. "If you sell your house, you can't buy another one in the same area. Of course, I'm angry!" she says.
In an interview with CommonWealth Magazine, Interior Minister Jiang Yi-huah even admitted that among over 100 cities around the world, Taipei's housing price-to-income ratio is the fifth-highest in the world, far exceeding that of New York, Tokyo or Seoul.
"I personally believe that this is an issue worthy of concern," Jiang says. When he returned from the United States 20 years ago to take a job as an assistant professor, he and his wife, who also taught at a university, had a combined annual income of over NT$1 million. Saving half of that while living frugally, it took them approximately 12 years to be able to buy a NT$6 million apartment.
In fact, the housing price-to-income ratio soared to 14 times in 2009. A middle class family with an average annual income of NT$700,000 had only a 15 percent chance of buying a house in Taipei, and those who persisted in chasing their dream of owning their own abode were saddled with a mortgage consuming 60 percent of their income. Only after 30 years would they have a cosy nest that fully belonged to them.
Eight Apartments Divided into 75 Homes
"Taipei has become more modern, but it's also becoming more and more like a feudal society," says engineer Peng Yang-kae, a standing director of the Organization of Urban Re's, which promotes community-based urban policy changes.
The house in Peng's name was actually bought by his mother, and many of his friends similarly belong to one of two "classes" of people dependent in one way or another on their parents for their housing: the "inheritance class" – those who inherited houses or received down payments for their mortgages from their parents – and the "family-dependent class" – people who live with their parents because they cannot afford a place of their own.
In the Taipei suburb of Sindian, a publishing executive named Miss Kung has made a different choice that has left her anxious about the future. After ending her marriage, Kung drifted between rental units in Muzha and Sindian.
"Buying a house would have meant shouldering a heavy mortgage burden, which would have made it impossible to live the life I wanted to live," she says. Instead of paying a mortgage, Kung was able to provide ably for her daughter, having somebody take care of her from the time she was young and often taking her on trips overseas.
Yet in opting for the lifestyle and quality of life she wanted, Kung now sees her 17-year-old growing older with a potentially difficult future ahead.
"I don't have any regrets, but I feel scared," the 40-something Kung says glumly, aware of the low salary levels facing the younger generation and the fact that she does not own a house. "I'm afraid that my daughter could fall into the abyss of poverty at any time."
Complicating the future for teenagers like Kung's daughter is the declining rate of mobility between different economic classes. Members of the future generation will have a much more difficult time rising from poverty to affluence.
Though their problems in buying or changing their apartments are real, this "ant tribe" represents a mere blur in the government's statistics. "The government believes that 88 percent of households own their own homes, so it worries that if it constrained real estate prices, a high percentage of voters will see a decline in their wealth," says Hua Ching-chun, an associate professor in Hsuan Chuang University's Department of Finance and Banking.
But other studies tell a different story. A telephone survey conducted by Hua Chang-I, a research fellow at the Institute for Physical Planning and Information, found that 70 percent of Taiwan's households own their own home, of which six out of every seven own one home and one out of every seven own two or more. The 30 percent of people without their own homes rent or live with their parents.
Those figures translate to 710,000 households, or more than 1.8 million people, in the greater Taipei area without their own homes who need places to rent or are consigned to living with their families. Yet the figures underestimate the size of this group, because they omit people who have come to the Taipei area from other parts of the country but have not changed their household registration to their adopted city. Many of these outsiders are forced to crowd into small single-room apartments.
No place more clearly reveals the living conditions faced by Taiwan's "ant tribe" than the properties owned by Chang Chuan-pin in the Taipei suburbs of Yonghe and Jhonghe. Chang has divided eight apartments that he owns into 75 tiny dwellings, each averaging roughly 10 to 13 square meters, rented out to members of the tribe.
So who are Chang's tenants? He boasts that they range from high-tech engineers and teachers to securities analysts.
Housing, Economic Policies Go Hand in Hand
The Ministry of Finance has recently promoted with great fanfare the idea of a "luxury tax" to curb real estate speculation. But even if it successfully restrains continued growth in housing prices, the quality of the "ant tribe's" living conditions is unlikely to improve. To ensure that local residents all have a better "home," Taiwan needs a more comprehensive housing policy.
But what kind of housing policy would best fit the bill? One foreign diplomat highly familiar with Taiwan's social problems couldn't help but say before leaving the country, "In many countries, housing policy is given the same priority and importance as economic policy."
Yet ever since Taiwan stopped building public housing about seven to eight years ago, the government's housing policy has been non-existent, handed over by default to private interests that have decided the direction of the housing market at their discretion. The government's role within this market-driven approach has been as a facilitator through financial incentives – subsidized low interest mortgages for first-time home buyers; full-year subsidies to rent an apartment; and subsidies for home renovations. A proposed "Housing Act," which has been in the works for many years, has yet to be approved.
These incentives cost the government more than NT$10 billion a year, but all of it has found its way into the pockets of developers and speculators.
When a market becomes dysfunctional, as has happened with Taiwan's residential property market, what kind of housing should the government provide its people?
Some answers may be found in Singapore and Hong Kong. The city state and former British colony, which have free economies and are ethically Chinese like Taiwan, have espoused socialist-leaning housing policies.
Since 1964, Singapore has embraced a "Home Ownership for the People Scheme." Its goals: providing citizens with affordable housing capable of meeting people's specific needs at different stages of their lives; preserving property values; and promoting social cohesion.
In Hong Kong, aside from leaving a part of the property market to the private sector, the government has run a "secondary market scheme" that builds public housing complexes to provide rental units to families that cannot afford to rent in private housing developments.
Housing Quality the Top Priority
Although Taiwan is clearly distinct from Singapore and Hong Kong, "the government can no longer leave private interests free to manipulate the housing market," says Chang Chin-oh, the director of the Taiwan Real Estate Research Center at National Chengchi University. Chang believes that curbing speculation is a short-term fix, but that a long-term housing policy is even more important. Here are some elements of what that might entail.
1. Price Transparency
The first step in creating a healthy residential property market involves reforming the housing tax system. "Taiwan does not tax income on capital gains from housing transactions, and with false housing sales contracts the norm in the industry, buying property has become the best tax dodge," says Peng of the Organization of Urban Re's.
Even more urgent than reforming the tax system is encouraging the transparency of housing prices. "Only if real estate information is clear can the core of a sound property market be built," says Chang, who believes greater transparency would have at least two positive effects.
Brokers would be less able to manipulate housing prices from the middle while serving as the representative of both the buyer and the seller. At the same time, developers could no longer capitalize on the lack of transparent information by using embedded marketing to hype the market and convey the impression that housing prices are constantly on the rise.
According to a survey by market researcher Nielsen Co., developers and builders spent more than NT$8 billion on advertising last year, accounting for 17.4 percent of total advertising in Taiwan. It was also NT$5 billion more than spending on advertising by the next biggest advertiser in Taiwan – the cosmetics industry.
2. Incentive Plans and an Effective Rental System
To help the 30 percent of Taiwan's households that rent their living space, Taiwan's government should offer tax breaks and incentives or force landlords to open empty apartments to tenants. It should also create an online information platform enabling tenants to find people to repair leaks or other problems in their rental unit and have the landlord pay for the work. Once this system has been built, people will have the confidence to live under it.
Following the Hong Kong model, the government could also invoke public authority and have landlords turn their units over to specialized property management companies. As long as tenants paid their rent, they would know that their buildings were being well maintained.
A sound rental system with similar guidelines would convince many Taiwanese that they would not have to necessarily buy a property to have a good home.
3. Improving Property Quality
The government should legally mandate that homeowners must have their residences inspected and even graded on a regular basis.
"Speaking of housing, the biggest misconception people have is to only discuss prices and not quality," stresses National Chengchi University's Chang. Aside from the quality of the building, the quality of life in the building is also critical.
So what kind of home do people in Taiwan ultimately want? To the country's new "ant tribe," the answer is pretty simple: a stable, carefree "home" rather than housing units that are forever unaffordable and inaccessible.
Transalted from the Chinese by Luke Sabatier