International Real Estate Review

In this research, cross-sectional data for the township level obtained from the 1990 and 2000 Population and Housing Census are used to study the phenomenon of high housing vacancy rates in Taiwan. Three simultaneous equations for housing price, vacancy rate, and moving rate are derived and estimated using 3SLS. The estimation results show that, in 1990, in a booming market situation, both expected housing price and current housing price had a strong, positive impact on the vacancy rate; however, the housing vacancy rate did not display a negative impact on housing price as expected. The results for 2000 show that housing price did not significantly affect the vacancy rate; however, the vacancy rate had a negative impact on housing price that was highly statistically significant. This result reflected the fact that housing market operation had swung to another extreme after the real estate bubble that started in the late 1980s and burst in the mid-1990s. The natural vacancy rate for each township can be obtained from the estimation results. The average rate for 2000 was 0.11 to 0.12, compared to an actual vacancy rate of 0.158, which implied that 75% of townships had an excess supply of housing. Only Taipei City, Kaohsiung City and townships in areas inhabited by Taiwan’s indigenous peoples had, on average, a relatively low excess supply rate.