3/15/2017. I. housing price & affordability. Outlines

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Outlines Cities as a Driver to Sustain Economic Growth and Social Cohesion

Skyscrapers, zoning and illegal buildings III.

Where are we standing now Tzu-Chin Lin Department of Land Economics

1 Outlines Cities as a Driver to Sustain Economic Growth and Social Cohesion I. Housing price & affordability II. Skyscrapers, zoning and illegal buildings III. Urban transformation & conflicts over land IV.Where are we standing now Tzu-Chin Lin Department of Land Economics National Chengchi University, TAIWAN 2017/3/17 2 I. housing price & affordability International Monetary Fund 4 1

2 5 6 The Economist Global House-Price Indicators global_house_prices 7 8 2

3 272 km2 2.7 millions 9 10 Affordable Housing? Not Any More! 26 August August

Snail without Shell demonstration in 1989 On-line information for housing price in Taiwan 13 http://lvr.land.moi.gov.tw/n11/homepage.

4 Snail without Shell demonstration in 1989 On-line information for housing price in Taiwan Factors behind Housing Boom Given inertia on the supply side, demand-side factors are expected to be more important in the short run. The supply of residential housing is influenced by the availability and cost of land, the cost of construction and investments in improving the quality of the existing housing stock. Over longer horizons, demand factors include household disposable income, shifts in demographics, tax system, and financial determinants such as lending rates and/or credit conditions. Homes as a Cash Machine not only are new buyers taking out bigger mortgages, but existing owners have increased their mortgages to turn capital gains into cash which they can spend. housing boom has been driven far more by investors than in the past, and if prices start to dip, they are more likely to sell than owner-occupiers. falling price will hurt consumer spending as the impulse to borrow against capital gains disappears, and in consequence, will drag economy down

5 Building Skyscrapers II. skyscrapers, zoning & illegal buildings 18 Skyscrapers are hard to build and even harder to make money from Skyscrapers pose challenges to designers and developers physical towers are always fighting against their own weight nearly 30% of skyscrapers floor spaces are taken up by liftshafts, stairwells and pillars, compared to less than 20% for lowrise buildings economic big American companies prefer low-rise campuses outside cities but large financial institutions are in favor of skyscraper for it confers prestige But, about 40% of the world's 200 tallest buildings have been completed since 2000 Changes Making Skyscrapers Possible materials new materials have the most visible effect on skyscrapers' looks: ex. glass other advances to materials have helped towers weigh less, which allows them to go higher. lifts as materials have improved, it has become possible to go higher but engineers have to work out how to get people to the top floors most tall towers now have at least two banks of lifts: one for the lower floors and one for the upper ones engineers build sky lobbies where passengers cross between lifts if they want to go the whole way down or up. computing computers have became powerful enough to build threedimensional models to handle complex designs

Motives to Building Skyscrapers speculative ventures towers built speculatively are the most common a developer finds an anchor tenant, borrows the construction costs and fills the rest of the

HSBC and Citibank towers at Canary Wharf in east London) a single company occupies buildings, so they are less subject to market changes a bank tends to pay a premium to be near other bankers

6 Motives to Building Skyscrapers speculative ventures towers built speculatively are the most common a developer finds an anchor tenant, borrows the construction costs and fills the rest of the building they are the riskiest of all its success is subject to supply of land in a desirable location, zoning laws and access to finance tailor-made headquarters company headquarters (such as the HSBC and Citibank towers at Canary Wharf in east London) a single company occupies buildings, so they are less subject to market changes a bank tends to pay a premium to be near other bankers government-backed towers built as a statement of economic intent (Dubai) or as a concrete index finger held up to the outside world (North Korea) an extreme case: Ryugyong Hotel in Pyongyang: 330 meters, 105 floors, 3000 rooms, started in 1987, halted in 1993 and resumed in 2008, in memory of its former leader, King Jong II Economics of Building Skyscrapers skyscrapers have an unfortunate habit of being finished immediately prior to a market collapse Chrysler building: completed when the tumble of Wall Street became the crash of 1929 Empire State finished in the bottom of the Depression (a quarter of floors was vacant in 1934: the Empty State building) viewing gallery was there only because the space could not be sold

Ideal vs Reality Building Tax for Taipei 101 on its

75 millions NTD = 4,346,300 USD formation of a city

incentives, among others zoning, growth boundary,

undesirable growth and guide development http://zh.

7 Ideal vs Reality Building Tax for Taipei 101 on its opening in 2005 was millions NTD = 4,346,300 USD formation of a city and its development are driven by economic incentives, among others zoning, growth boundary, green belts, among others, are often used to prevent undesirable growth and guide development 台北 101#/media/File:Taipei101.portrait.altonthompso n.jpg Phoenix, Arizona

8 Tucson, Arizona Portland, USA urban growth boundary (UGB) was established in 1979 land which is outside the UGB is limited to agriculture, forestry or other uses compatible with sustaining natural resources inside the UGB, development is encouraged as a way to promote infill and efficient use of the land Green Belts Dutch s Green Heart om/smallq/archive s/cat_90260.html

Agrigento, Italy 37 Italy 30% of houses were built

reached 80% in Agrigento on the south coast of

their property is their own business Italians

Hotel de El Algarrobico (Spain) started its

Law came into effect, and situated in the Natural

has not been demolished yet 39 On top of a

10 Agrigento, Italy 37 Italy 30% of houses were built without planning permission, the figure even reached 80% in Agrigento on the south coast of Sicily Italian attitude is that what people do on their property is their own business Italians would not shop neighbors to the authorities 38 Hotel de El Algarrobico (Spain) started its construction in 1989, one year after the Coastal Law came into effect, and situated in the Natural Reserve of Cabo de Gata declared illegal but it has not been demolished yet 39 On top of a 24-storey building in Beijing ( 海淀區紫竹橋東北角 ) 200,000 US dollars spent by a professor! 40 10

III. urban transformation & rights in land A man's house is his

Chongqing City, China 42 The Three Gorges Dam, China the

dam body was finished in 2006 and all of the originally planned

2008 the dam has also flooded archaeological and cultural sites

11 III. urban transformation & rights in land A man's house is his castle? Chongqing City, China 42 The Three Gorges Dam, China the world's largest electricity-generating plant of any kind the dam body was finished in 2006 and all of the originally planned dam components of the project were completed on October 30, 2008 the dam has also flooded archaeological and cultural sites and displaced some 1.24 million people 7/03/25/the-hardest-nail-house-inchina-photo/

Wenlin Yuan urban renewal project in Shilin District Despite Wang family s unwillingness to participate in the urban renewal project initiated by a private firm, Le Young Construction Co ( 樂揚建設 ),

The city government also said that the Wangs had failed to actively express their opposition to the plan.

A severe clash ensued as police forcibly removed the protesters and the crew flattened the houses. http://www.taipeitimes.

12 Wenlin Yuan urban renewal project in Shilin District Despite Wang family s unwillingness to participate in the urban renewal project initiated by a private firm, Le Young Construction Co ( 樂揚建設 ), its two townhouses were still put on the list of houses to be torn down to make way for a 15- story apartment building since a majority of residents on the project site have agreed to the plan. The city government also said that the Wangs had failed to actively express their opposition to the plan. In March 2012, while hundreds of people supporting the Wangs surrounded their homes to oppose the tearing down, a demolition crew escorted by about 1,000 police officers moved in. A severe clash ensued as police forcibly removed the protesters and the crew flattened the houses. 2/13/ Urban Renewal in Taipei, Taiwan 46 Anticommons Wanhua District needs to be Revitalized Negotiation with a group of land owners creates cooperation and coordination problems Fragmentation of land ownership likely leads a larger project to being prohibitively expensive, only if possible The opportunity to capture the gain from land assembly incentivizes all owners to hold out for a higher price This price gouging can destroy the surplus that would otherwise be enjoyed by the would-be assembler and all of the fragment holders Housing Age 35 Wanhua 33 Datong Zhongzheng 31 Daan Shongsan Xinyi 29 Zhongshan Wenshan Shilin Beitou Nangang Neihu 15 Plot Size (m2)

Partition Frequency Frequency of Assembly and Partition 7 6 5 4 3 2

05 0 Below 1001- Above 101-200 201-300 301-400 401-500 501-600

25 4.65 4.17 2.20 Partition Frequency 0.31 0.35 0.66 0.86 1.17 1.

assembly and 172 times of land partition up to plots of 600 m 2, the

13 49 50 Frequency Plan Area: 39.5 hectares Developable Area: 23 hectares 51 Assembly Frequency Partition Frequency Frequency of Assembly and Partition Below Above Assembly Frequency Partition Frequency Frequency of Assembly and Partition a total of 799 times of size change; including 627 times of land assembly and 172 times of land partition up to plots of 600 m 2, the frequency of land assembly increases with plot size (scale of development project) the whole Wanhua train station areas will take 76 years to be fully developed Plot Size (m2) 52 13

Sinyi business district Aerial imagery of

land parcels Study period: Jan. 1984 - Dec.

imagery of 2002 Source:http://www.historygis.

14 Sinyi business district Aerial imagery of 1973 Study area: A total of 122 commercial land parcels Study period: Jan Dec Source: 54 Aerial imagery of 1991 Aerial imagery of 2002 Source: 55 Source:

Aerial imagery of 2007 Aerial imagery of 2011 Source:http://www.historygis.udd.taipei.gov.

00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.

15 Aerial imagery of 2007 Aerial imagery of 2011 Source: 57 Source: 58 Comparison of sizes between developed and vacant parcels 50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Parcel size and ownership structure significantly affect the probability of land to be developed A two-stage decision pattern seems to be in placeownership structure matters more than parcel size size of developed parcels size of vacant parcels

Nearly 90% of developed parcels are in singleownership, in contrast to 43% of vacant parcels. The average size of developed parcels is 11,166 m 2, in contrast to 1,350 m 2 for vacant parcels.

16 Nearly 90% of developed parcels are in singleownership, in contrast to 43% of vacant parcels. The average size of developed parcels is 11,166 m 2, in contrast to 1,350 m 2 for vacant parcels. Parcels that are larger in size and in single-ownership are more likely to be developed sooner. IV. Where are we standing now 61 Cities accommodate the majority of population and firms that are driving economy forward A skyrocketed housing price will price the young talents out of the city A city is not always growing as planned There is a cost, likely to be a high one, for the respect of private ownerships in land Thank you! 63 16

Building cities. Vernon Henderson, Tanner Regan and Tony Venables January 24, 2016

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