Introduction: Taiwan’s consumer confidence has seen a continued decline in November, marking the second consecutive month of weakening sentiment. The drop comes as selective credit controls, implemented by the central bank, continue to influence the local real estate market. This shift in market dynamics has been felt strongly in the housing sector and could signal broader concerns for the country’s economic outlook in the coming months.
Details of Consumer Confidence Decline
According to a survey conducted by National Central University (NCU) between November 18-21, Taiwan’s consumer confidence index (CCI) fell by 1.57 points to 75.49. This follows a 0.78-point decrease in October, suggesting a sustained trend of pessimism among local consumers.
The CCI is a crucial measure of public sentiment, assessing perceptions about consumer prices, the economy, stock markets, and future purchasing decisions for goods like homes and cars. In particular, the index reflects consumer outlooks on employment and family finances for the next six months.
Impact of Credit Controls on the Housing Market
A significant factor contributing to the dip in consumer confidence is the central bank’s recent credit tightening measures. The Taiwanese central bank introduced selective credit controls in September, which have had a cooling effect on the property market. The central bank’s actions include lowering the loan-to-value (LTV) ratio on housing loans and increasing the reserve requirement for banks to curb the risk of a housing bubble.
Dachrahn Wu, Director of the NCU Economic Research Center, pointed out that these policies have made it harder for individuals with lower credit ratings to access housing loans. While the measures impact home builders and multiple-property owners to a lesser degree, they pose a more significant challenge for prospective home buyers with limited access to credit, potentially inflaming social unrest if not addressed.
Sub-Indices Show Weakening Consumer Sentiment
Among the six sub-indices that make up the CCI, the one gauging the likelihood of purchasing durable goods (such as homes and vehicles) saw the largest drop, plummeting 4.59 points to 103.1. This represents the lowest level since February 2023. This decline highlights the strained affordability of big-ticket items, with the real estate sector hit hardest.
Furthermore, the sub-index on consumer sentiment regarding stock purchases also declined sharply by 4.41 points to 55.88. This was driven by ongoing concerns over U.S. economic policies under President-elect Donald Trump, particularly his stance on tariffs and trade.
Other Economic Sentiments
Other sub-indices reflecting sentiments about the local economy, employment, and family finances also saw slight declines. Specifically:
- Family Finances:Â Down 0.16 points to 89.21
- Employment Outlook:Â Down 0.14 points to 78.04
- Local Economic Climate:Â Down 0.12 points to 84.91
These decreases indicate that while consumers are not yet in a panic, there is a noticeable sense of uncertainty about the future economic landscape in Taiwan.
Public Concerns Over Low-Income Housing Buyers
As credit controls tighten, attention is now turning to the potential impact on low-income groups who are most vulnerable in the current housing market. According to Wu, if the issue is not managed carefully, it could provoke public dissatisfaction, particularly among those who are unable to purchase homes due to stricter lending requirements.
Conclusion:
Taiwan’s consumer confidence faces significant challenges in the face of ongoing credit control measures. While these controls are intended to prevent the housing market from overheating, they may have broader consequences for consumer sentiment, particularly among those who feel the pinch in the real estate sector. With uncertainty surrounding both local and global economic conditions, the coming months could be critical for Taiwan’s consumer outlook.
Table: November 2024 Consumer Confidence Index Breakdown
| Sub-Index | November 2024 | Change from October |
|---|---|---|
| Likelihood of Purchasing Durable Goods | 103.1 | -4.59 |
| Likelihood of Purchasing Stocks | 55.88 | -4.41 |
| Sentiment on Family Finances | 89.21 | -0.16 |
| Employment Outlook | 78.04 | -0.14 |
| Local Economic Climate | 84.91 | -0.12 |
| Price Expectations | 41.79 | +0.02 |
FAQs:
Q1: Why is consumer confidence declining in Taiwan?
A1: The decline in consumer confidence is primarily due to the impact of selective credit controls imposed by the central bank, which have cooled down the property market and created uncertainty in other economic sectors.
Q2: What are selective credit controls?
A2: Selective credit controls are measures taken by the central bank to limit excessive borrowing in the housing market. In Taiwan, this includes reducing the loan-to-value ratio for housing loans and increasing the reserve requirements for banks.
Q3: How is the housing market affected by these measures?
A3: These controls have made it more difficult for potential homebuyers with lower credit ratings to secure loans, leading to a cooling in the property market.
Q4: Which sectors are most impacted by the current economic conditions?
A4: The real estate and stock market sectors have been most affected, with consumers showing a reluctance to make large purchases and investment decisions.
Q5: What might happen if the housing market continues to struggle?
A5: If the housing market remains under pressure, it could lead to broader social dissatisfaction, particularly among low-income groups who find it increasingly difficult to afford homes.
