The 1990s Taiwan residential construction boom: a supply side interpretation

摘要

An unprecedented boom in Taiwanese residential unit production is described and explained as a supply side phenomenon. Unit construction tripled from 1991 to 1993 and maintained that level for two years before falling back to normal levels. The existence of a peak in real production is identified from production data and considered as supply-side phenomenon. The evidence includes a strong growth in development loans (supply side) compared to house purchase loans (demand side), and a considerable rise in vacancy rates after the Peak. This supply side interpretation is further examined within single equation and simultaneous equation econometric models. This Peak is seen as precipitated by the interaction of the announcement of a new housing regulation (volume control) and an increase in development credit availability. These two events far outweighed demand side considerations for developers. An indirect method of estimation within a unit completions equation indicates that volume control significantly influenced construction. Conversely selling price was insignificant, consistent with the supply side interpretation. A construction approvals equation supports these conclusions. Other equations explain prices and vacancies. The model was cast in the form of a demand and supply for new completions rather than for total units in order to explain production.