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Real-estate market still in doldrums

"For the first time in a decade, market demand posted negative growth ... in part because of the US economic decline and domestic political disorder and inefficiency."

A report by Colliers Jardine Taiwan

The real-estate market, which has just passed one of its most depressing years, could be facing more gloom if the government doesn't take concrete action such as opening the market to Chinese investors, according to industry groups.

In a recent commercial property market report, Colliers Jardine Taiwan Ltd concluded that government assurances last year -- including opening the sector to foreign and Chinese investors, direct three links with China and revisions in the insurance law -- did not square with actual constraints.

"None seemed able to breathe life into the stricken commercial real-estate market," the report said.

According to Colliers Jardine Taiwan, the market's main problems are that "Taiwan is not international enough, the market is too small, cross-strait relations are still unclear ... no clear improvement of the domestic political situation and rental returns are unattractive."

The Taiwan Province Architecture and Development Association (台灣省建築開發公會), which has some 3,000 members from the design and real-estate industries, painted a similar picture of gloom on last year's results for the nation's housing market outside of Taipei and Kaohsiung, saying the value of new projects was the lowest in 10 years.

"Last year, investment in the pre-sold housing sector totalled only NT$91.2 billion, representing a 50.5 percent contraction over 2000," said Lai Cheng-I (賴正鎰) president of the Taichung-based association, last week.

Unlike in the US or Australia, virtually all housing units in Taiwan are pre-sold, which means that the cash to build is raised before construction begins.

Collier Jardine characterized the Taipei office building sector last year as experiencing a "severe slump," with prices, rents and vacancy rates all plunging from highs in 2000 to 10-year lows this year. "For the first time in a decade, market demand posted negative growth ... in part because of the US economic decline and domestic political disorder and inefficiency," the report said.

Adding to Taipei's property woes, severe flooding last year drove up the amount of pre-sold housing projects in neighboring Taoyuan, which recorded the highest in the country -- outside the capital and Kaohsiung -- with NT$21.2 billion, said Li Shun-pin (李順賓), secretary general of Taoyuan County Architecture and Development Association (桃園縣建築開發公會).

"Taoyuan's proximity to Taipei and the presence of a number of electronics firms are key to the developers' decision to introduce more pre-sold housing projects outside the capital," Lee said.

Colliers Jardine asserts that prospects for the Taipei commercial real-estate market rely on foreign businesses, not for their ability to soak up excess supply, but for the economic and political endorsement their investment has on the market.

"The government is aware that if preferential conditions and the environment are not sufficiently attractive, then the multinationals will readily abandon their plans in Taiwan," the report said.

Despite chronic problems last year, the association believes that recent changes in the political situation, combined with expected implementation of new measures, will "sweep away the gloom of last six months" and move the pre-sold housing market to 30 percent growth this year.

"With the new Cabinet and the recent expression of goodwill from China toward the DPP, during the warmth of spring the flowers will bloom across the Strait," Lai said.

But he said that the government had to do more if the real-estate sector was to make any substantial progress this year, including some drastic legislative changes regarding Chinese investment.

"The government should consider drafting a new immigration law that would allow developers from China who invest over NT$20 million in Taiwan to receive residency permits, which would encourage them to stay on and invest more," Lai said.

In justifying his remarks, Lai said he had recently travelled to China where he had met with 20 major developers who were keenly interested in investing in Taiwan, particularly in property around tourist sites and in major cities.

Industry leaders believe that Chinese capital could play a major part in the resuscitation of the real-estate sector.

Even though the government is studying such a possibility, the government appears far from ready to fling open the doors to Chinese capital.

And as for allowing Chinese citizens to reside in Taiwan, that appears even further away, as it has taken over 50 years for the government to allow tourists from China to make visits under tight regulations.
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