Tales of An Unaffordable Capital

From land speculation and sky-high property prices to the Sunflower Movement and the old political elite, this feature series looks at the challenges through the eyes of young Taiwanese
Taipei is pricing many of its younger residents out of the city.

Victoria Weng, 30, is determined to stay in the leafy Taipei suburb she grew up in. She remembers walking to school with her sister here. Many of her friends live in the area. And as a flight attendant, she works at Taipei International (Songshan) Airport just around the corner.

“I don’t think I can imagine living anywhere else,” she said, walking among the small boutiques and independent coffee shops that line the streets of the Minsheng Community, a former enclave planned by the U.S. military. “To me, being in Taipei City near this location is the most important consideration I have.”

That wish finally came true last November when she managed to purchase a studio in a newer development just down the road from her parents’ three bedroom apartment. She had moved quickly; the unit was just one of the few to hit the market in recent months.

The studio, which at 238 square feet (or 6.6 ping) is just large enough for a bed, a couch and a kitchenette, cost her NT$10.7 million (US$355,000). Another NT$200,000 was spent furnishing the place and buying furniture from IKEA. “The costs,” she said, were expected. “This is the reality of how things are if you want to live in Taipei City.”

The housing crisis in Taipei is a relatively new phenomenon. Prices have tripled since 2001, roughly the time frame during which wages have stagnated for the vast majority of the workforce. And the city recently surpassed Hong Kong as number one globally in the unaffordability of housing.

In a city of mostly aging concrete tenement buildings, housing prices have reached an average of NT$675,000 per ping (US$630 per square foot) or 15.01 times the average household income, buoyed by soaring returns on property speculation and low interest rates.

The squeeze has been perhaps the toughest on younger people, who are struggling to make ends meet amid slumping salaries and rising commodity costs. Those who do manage to move out are confronted with the facts: windowless rooms, sublets, basement units, or like in Victoria’s case, a 238-square-feet unit for a price that would have once bought a luxury three bedroom apartment.

House Picture Victoria Weng’s studio in Minsheng Community. Photo: Vincent Y. Chao, Thinking Taiwan

Although rents are more affordable, most professionals her age can still only afford to let studios or small one-bedroom units, which go for roughly NT$18,000 a month, excluding bills and maintenance. Average incomes for 30 to 34 year-olds have remained at the same NT$52,000 per month since a decade ago.

All of this means that young people today are having a harder time doing what most of their parents did a generation earlier in the city: buying an apartment, getting married, and having children.

“Most of my friends are being priced out of Taipei City. Instead, they are moving to New Taipei City or Taoyuan County, where they can find an apartment for maybe half the cost. But it’s not just rent or housing prices. Everything is just more expensive here, even the food,” said Victoria. “It’s hard to think about marriage or children.”

Since 2012, the government has attempted to build through the private-sector ‘suitable housing’ for young and low-income people. Two such communities with thousands of units, of which a percentage will be set aside for rentals only, are located in Linkou and Banciao on the peripheries of New Taipei City.

But being almost an hour away from central Taipei, some are skeptical whether the projects will succeed, as they will cut young people off from the social life and culture of the city where they work and play. The long commute is also a factor in whether or not to move, especially in Linkou, given that a promised MRT system has been delayed for another year.

Chester Lai, for example, purchased an apartment in a new building in Linkou last spring. The unit provides roughly 996 square feet in floor space over two-stories and cost him NT$12.5 million (US$415,000), with payments starting at NT$34,590 a month over 30 years. Despite the handover last March, that apartment has remained empty and unfurnished.

“I added up the costs of commuting every day, including fuel and parking fees. It just wasn’t worth it in the end,” Chester, 32, said at a sublet he shares with three journalists he works with near an MRT station in Taipei’s suburban Wenshan District. He’s now thinking about selling the unit and looking for something closer to central Taipei.

Young people are being encouraged to move to Linkou, on the outskirts of New Taipei City, where the government plans to build thousands of units of 'suitable housing' Young people are being encouraged to move to Linkou, on the outskirts of New Taipei City, where the government plans to build thousands of units of ‘suitable housing’. Photo: Flickr

Even as housing in Taipei becomes, in most cases, an unattainable luxury for much of the capital’s youth, some developers are betting that prices could rise higher still. All around the city, construction canes still dot the cityscape. But few of these new apartments are being built to be affordable.

Of the 21 major developments being sold in the city, only three fall below NT$700,000 per ping (US$650 per square foot), according to housing website Rakuya, still far above any threshold of affordability. Most were priced instead between NT$900,000 and NT$1.2 million per ping, almost double the current average housing prices.

This is compounded by growing interest in the property market from overseas Taiwanese, expats returning from China, as well as, worryingly for some, Chinese investors, despite efforts by the government to rein in property spending and cool the market.

Just a few doors down from a marble clad development that sells for over NT$120 million per unit, Brandin Yang, 26, a score composer and a small business owner, is one of the residents of a small windowless studio. In the daytime, he manages the Libratory, a used bookstore near Shida that is one of Taipei’s commercial hubs.

And at night, he also helps manages the digital media campaign for Ko Wen-je (柯文哲), a candidate for Taipei City mayor.

“It’s convenient. There are lots of midnight snacks and places to drink downstairs,” he said of his studio on the second floor of a building located near Linsen N. Rd., the heart of Taipei’s red light district. Before he goes to sleep, he wears headphones to block out the sounds from next door. “I have a lot of interesting neighbors.”

Under 30 year-olds in the city make, on average, NT$43,000 a month, and Brandin’s rent is within the limits of what would be considered acceptable. But while he pays around NT$10,000 a month, including utilities, for his windowless studio, elsewhere in Taiwan that same amount could have been enough for a large two bedroom apartment.

Brandin pays NT$10,000 a month for a windowless room in the center of Taipei City. Photo: Vincent Y. Chao, Thinking Taiwan Brandin pays NT$10,000 a month for a windowless room in the center of Taipei City. Photo: Vincent Y. Chao, Thinking Taiwan

The high costs of property in Taipei also hurt Brandin in other ways. On top of everything else, he has to pay a total of NT$27,000 a month to rent the underground space for his bookstore. That amount, after much argument with his landlord, is expected to go up another NT$2,000 this year.

“I don’t think that Libratory can survive another rent increase. We only manage to make a small margin on the books, everything else is provided for free,” he said, referring to a reading room and open space to hold gatherings and events. Already, a number of independent bookstores, most much bigger, have disappeared from the area.

All of this is changing the social fabric of how young people were once expected to behave.

Victoria’s sister Mandy, a 25 year-old travel agent, for example, having taken over her sister’s bedroom, refuses to move out from home. In fact, she isn’t even considering it. “I’ll wait for the housing market to collapse in a couple of years. Otherwise, how can I even afford to rent a place?”

Victoria, now the owner of NT$10.7 million property, disagrees. An example of the difficulties that Taipei has encountered in combating housing prices, she now has too much riding on the property market for her to want it to collapse, or even to cool down. “I hope that prices will continue to increase.”

“This way I might be able to trade it in for something larger in the future.”

 

Vincent Y. Chao is an assistant editor at Thinking Taiwan and works for the Thinking Taiwan Foundation.

Edit: An earlier version of this article erroneously stated Brandin’s rent to be NT$13,000 and NT$20,000 for his bookstore. The correct amounts are NT$10,000 and NT$27,000, respectively.

5 Responses to “Tales of An Unaffordable Capital”

May 13, 2014 at 4:48 pm, JJ Chen said:

I’ve been thinking for a while of a scenario of “cooling down” the housing market :

All this mess is happening because Taipei is the central nerve of the whole island, where all the businesses and interests are converging.
What if, one day, the government had balls enough to spread all (or at least, a big chunk of) the companies out of Taipei ? Relocate just enough of the big businesses and jobs to disengorge the jobs and housing congestion in Taipei, but with still enough force to keep it being attractive.

Where to spread those businesses and jobs ?
In other cities, such as Hsinchu, Taoyuan, Taichung, Tainan, Kaohsiung, and even, why not on the East coast.

While a lot of people would tell this is an unproductive and unfeasible crazy idea, I’ll counter-argue with the fact that Taipei became like this because it’s a product of its era ! When it started developping from the farmlands into the current wannabe megalopol it is nowadays, it was a time where urban development (housing and factories) were a necessity, since a lot of people had recently arrived from China with Chang Kai Chek, and well… as soon as they realized going back home in China wasn’t going to happen, they had to settle down, and get jobs to restart the economy !

And they had to do it quick !

Hence, they hastily concentrated most of the constructions and investments in one place in order to make things more convenient, and that place became today’s Taipei.

Nowadays, in the age of Internet and delocalized workflow, people don’t necessarily have to be physically present at their working space anymore. Emails, facebook, dropbox, skype conf and google hangouts help businesses keeping it together communicationwise without needing to have their employees and partners all in the same space.

Therefore I believe it is not a necessity to have all the businesses physically concentrated in the same space anymore. Spreading them out throughout the island would be a most welcome purge for Taipei, and not only for the working environment but also for the housing conditions, as well as making other cities more attractive for both working and housing opportunities.

It will certainly require a lot of coordination between all the cities mayoral decisionmakers, and most certainly a pain in the rear to organize such a massive “urban exodus” (as opposed to the more common rural exodus), but the long term benefits would far outweigh the hassles of the move, since chances are high it would benefit everyone.

It is all about balance :
Back then, moving in and living in the city was the better option, offering more opportunities.
In our age, after decades of relative urban prosperity, the city is now saturating.
So massively moving out from it might actually be the move that’s most fitting our era.

Reply

May 14, 2014 at 8:53 pm, mike said:

@JJ Chen – you could get your decongestion policy simply by having the Taipei City government cut public spending and increase local taxes. People would soon leave, as they would be unable to make ends meet if they continued to stay. No need for compulsory purchases.

********

This is one of those articles that, through description, seems written to provoke the leap to policy prescriptions, as in the comment above by JJ Chen. The missing premise here seems to be that the “rightful” task of government is social engineering, i.e. the use of tax policy to achieve a particular outcome, such as the outcome that Victoria Weng can buy a larger apartment or house in Taipei City at some price substantially lower than current market prices.

My initial reaction to reading this article was, “OK some people cannot afford to buy property in Taipei city. Well? There are school children elsewhere whose parents cannot afford enough fresh meat and vegetables every day.” What’s the relevant difference? Is Victoria Weng somehow more deserving of government intervention than skinny little Johnny who lives in Tainan and who’s never had a steak dinner?

More importantly, once that aforementioned missing premise is accepted – that the “rightful” task of government is social engineering – then the question becomes not of when the government should intervene in the market, but when should it stop intervening in the market. If the only answer to that question is “when revenues are insufficient”, then the obvious counters are another tax, or a higher rate of an existing tax, or more government borrowing. In other words, we face the prospect of principally unlimited government intervention, democratic or otherwise.

So rather than simply assuming the government must intervene in the housing market, why not consider ways in which the same ends might be achieved by government disengagement? As JJ Chen mentions above, a major reason so many people want to live in Taipei city is work, and in turn so many companies want to locate in Taipei because it has better transport infrastructure and access to legal and accounting resources than elsewhere in Taiwan. Well, why not consider how government could be disengaged (and perhaps decentralized) in ways that incentivize people to leave Taipei City and set up elsewhere? And further afield than just the awkwardly named “New Taipei City”.

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May 15, 2014 at 9:12 am, Bartek Mytnik (@BartekMytnik) said:

#Taipei has Chinese investors instead of Russian (#London). Besides that it’s hardly different with estate pricing from other capitals.

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May 20, 2014 at 9:08 pm, HyperCaine said:

Let’s take another world capital to compare…London. Average salary there is ~£35k per year gross. This works out to roughly £2,200 per month after tax is taken away. To live in a 1-bed studio in central London (zone 1) you’re going to pay £900+ just on rent plus at least £200 on bills and council tax. In other words about 50% of your income will go on accommodation, never mind food, transport and other expenses, etc. Compared to that, earning 52k NTD per month and paying about 22k NTD for rent and bills is a slight improvement.

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June 04, 2014 at 12:18 pm, taipeir said:

Yeah well Taipei is not London that’s for sure.
The government, legislators, civil servants and landlord class and older generation want the property boom to continue in Taipei, they are all invested in it. They would never move government functions out of Taipei (That would depress property prices) and in fact they don’t fully support the development of other cities either such as Taichung or Kaohsiung. They see themselves as a wealthy island on an island.

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