Authors: Sheng-Hau Lin, Jing-Chzi Hsieh
Abstract:Moderate residential investment could drive economic development, yet Taiwan seems to have the problem of overinvestment in residential property discussed in related literature. By applying the panel Autoregressive Distributed Lag model (ARDL), this study investigate what drive residential investment (the floor areas of new building permits as proxy) using data on 20 counties of Taiwan during 1999 to 2014. The empirical findings indicate that lagged interest rate is most important factor in explaining residential investment in both long-run and short-run. Besides, the lagged residential investment, the lagged median disposal income, and construction cost have statistically significant impacts, yet the housing price only has the short-term statistically significant impact. The population represented the housing demand is not an effective factor. The empirical results of Taiwanese are different from the case of emerging market, like China, which population is still primary driver in explaining residential investment. These results also reveal that Taiwan’s government promote real estate industry by easing monetary policy in the past two decades, and cause the overinvestment in residential property existed.
Keywords: Residential investment; Taiwan; Panel data