Taiwan's semiconductor success fuelling surge in home prices
TAIWAN’S success in the semiconductor industry is fuelling a boom in house prices that is spreading from north to south, with highly paid workers at major chipmakers pushing the property market to buck the trend of a global slowdown.
Nowhere is the economic impact of the chip industry on the housing market more visible than in Taiwan’s main tech hub Hsinchu, just 30 minutes south of Taipei by high-speed rail. Luxury apartment complexes are being built just a stone’s throw from the Science Park in the city’s north, where the headquarters of the world’s biggest chip manufacturer, Taiwan Semiconductor Manufacturing Company (TSMC), and other companies are located, churning out crucial chips.
Home prices in Hsinchu have soared 99 per cent in the past five years, almost tripling the pace of Taiwan’s average, according to data from broker Sinyi Realty. Recent fears of a global recession and the wave of layoffs hitting major tech companies in the US and elsewhere have done little to dampen enthusiasm – prices are still 22 per cent higher in the last three months of 2022 compared to a year earlier. By comparison, the total value of homes in San Francisco fell by 6.7 per cent from the year before in December, the most of any major US metro area.
The unaffordability of homes is a mounting headache for Taiwan’s government, which has struggled for years to tame the market amid record low interest rates. The central bank has warned that surging home prices worsen the wealth gap in Taiwan even more so than in countries like the US, as property makes up a large part of households’ total wealth. The spread of the property boom to the traditionally cheaper south will further exacerbate public dissatisfaction.
An entry-level engineer now at TSMC or a competitor makes around NT$1 million (S$43,583) to NT$2 million annually, around two to four times the average salary in Taiwan, according to the Statistics Bureau. The amount of wealth in Hsinchu’s north, an area of well-manicured streets and upscale malls, is evident in the opening of new restaurants by Michelin-starred chefs. On weekends, shoppers flock to Tesla and BMW showrooms or peruse new housing developments.
“I have been looking at properties since 2013 when I first started working in Hsinchu,” said 33 year-old Johnny Chung, an ex-TSMC engineer who’s now a technical manager at chemicals maker DuPont de Nemours. “Four years ago, I thought the prices were too high, so I didn’t buy. Now the prices have nearly tripled.”
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Chung, who bought a pre-sale apartment for NT$1.3 million, said that house-hunting is a popular pastime in Hsinchu, as the city’s rapid tech-driven growth has left it with a dearth of leisure offerings. “Hsinchu’s engineers have plenty of money to spend but nowhere to spend it.”
While governments elsewhere, such as China and South Korea, are moving to loosen measures to stimulate the property market as real estate prices soften, Taiwan is doing the opposite. In January, Taiwan’s legislature passed the Equalisation of Land Rights Act to curb speculation and slow the rapid rise in prices. The law, which could come into effect in the first half of 2023, aims to ban the reselling of pre-sale homes and the spreading of misinformation with the intention to help flip properties.
“Buying new properties in Hsinchu City now seems like a fantasy for us who aren’t engineers at the science park,” said Sarah Lin, a 27-year-old shop assistant in the city’s biggest mall. The chip-driven property boom is now set to spread beyond Hsinchu, in tandem with the expansion plans of TSMC and other companies. The two cities seeing the highest price growth after Hsinchu are Kaohsiung and Tainan in the south, both of which in the past few years have seen an influx of tech companies and factories because of favorable government policies.
“In the older days, when we talked about residential prices skyrocketing, it was all about Taipei because that’s the capital and where everything happens,” said Henry Chin, head of research for Asia Pacific at CBRE Group. TSMC’s newly established hubs in Tainan and Kaohsiung have prompted investors to turn to the southern cities for opportunities, he added.
Home values in Tainan rose almost 9 per cent in the last quarter of 2022 from the same period a year ago, while prices in Kaohsiung soared 14 per cent, according to Sinyi Realty, compared with the 7.6 per cent average increase across Taiwan in the same period.
TSMC ramped up its manufacturing capacity in Tainan from 2020, starting mass production of its advanced next generation 3- and 5-nanometer chips, creating 9,000 jobs, according to the company. That has drawn other companies to also expand in the Southern Taiwan Science Park, which aims to replicate the success of the park in Hsinchu. TSMC’s expansion is expected to create 18,000 jobs in Tainan alone, double the current working population, according to a research report by Hsin Yuan Business Rehouse, a real estate agency.
“For many people who come from southern Taiwan like me, a common life plan used to be, move to Taipei and work diligently there for five to seven years, save up some money, then return to our hometowns to buy a house and start a family,” said Tony Lin, a 33-year-old Tainan native who works in advertising in Taipei. Now, he said he is priced out of Taipei and probably Tainan.
“I’m not entirely sure what I should do now,” said Lin. “I’m still figuring it out.” BLOOMBERG
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