The View | Why Taiwan is struggling to curb its tech-fuelled housing boom

Two themes have pervaded global stock markets since the beginning of 2023: hopes of a soft landing for the United States economy and the enthusiasm about generative artificial intelligence (AI). In Asia, the biggest beneficiary of these two drivers of sentiment is Taiwan.

Home to the world’s largest contract chip maker, Taiwan Semiconductor Manufacturing Company (TSMC), the island plays an outsize role in the technology sector. Not only does Taiwan produce more than 60 per cent of the world’s semiconductors and 90 per cent of advanced chips, TSMC is the sole supplier of the most sophisticated chips of US tech titans Apple and Nvidia.

Taiwan’s main stock market index is up by about 50 per cent since the start of 2023, powered by the more than 100 per cent rise in the share price of TSMC, which accounts for roughly a third of the gauge.

The impact of the AI boom is particularly visible in Taiwan’s housing market. Low mortgage rates have been negative in inflation-adjusted terms for the last several years – the average mortgage rate stood at just 2.1 per cent in July, compared with 4.1 per cent in Hong Kong and 3.9 per cent in South Korea. Fuelled by this low rate and preferential loans for first-time buyers, home values have risen sharply since the eruption of the Covid-19 pandemic, defying increases in interest rates and persistent tensions across the Taiwan Strait.

The fear of missing out on a big upswing in the property market has proved far more potent than successive bouts of geopolitical risk. “Given there have been several Taiwan Strait crises in the last several decades, many local citizens have become less sensitive to geopolitical risks,” said Ping Lee, head of research at CBRE in Taipei.