Real-estate amendment gets passed

The legislature yesterday passed an amendment to a law that will allow Chinese from across the Taiwan Strait to invest in real estate in Taiwan.

Reaction to the amendment were mixed on whether it would spur large amounts of capital into the country to bolster the lagging property market, saying there were better deals at home in China.

Several amendments to the Statute Governing the Relations between the People of the Taiwan Area and the Mainland Area (台灣地區與大陸地區人民關係條例) were passed, including one that will permit Chinese nationals and corporations to purchase property in Taiwan.

While legislators set out to overturn the previous law that made any Chinese investment in real estate illegal, they left in a clause whereby applications from Chinese would by subject to approval by related government agencies.

In effect, the government still maintains the right to veto applications from what they might consider dubious Chinese investors.

Derek Huang (黃正忠), head of international research for CB Richard Ellis, compared the amendment to another that allowed overseas Chinese who were originally from China to visit Taiwan, saying that the added restrictions have kept the tourists away.

"We haven't seen lots of Chinese people visiting Taiwan, so that's we why we still doubt such an announcement on real estate will alter the market," Huang said.

It is unclear as to when the first Chinese investment might be seen, as the task of establishing the details of how the system will work have been left to the Ministry of the Interior and related agencies.

Despite hopes that Chinese capital will revitalize the ailing real-estate sector, some feel the market simply doesn't offer big enough returns on commercial real estate when compare to cities such as Shanghai and Beijing.

Huang said he didn't expect a flood of Chinese investment in the wake of the amendment.

"We don't expect that there will be many Chinese investors interested in the real-estate market in Taiwan," he said. "Returns on real estate here are low compared with those in China ... Shanghai has better rental yields and capital gains."

According to a recent report by CB Richard Ellis, rental yields -- which are the percentage differences between the capital value of property and annual rental returns -- on office properties in the fourth quarter of last year were 14 percent in Shanghai and 17 percent in Beijing.

According to Calvin Wang (王治平), general manager of Jones Lang LaSalle in Taiwan, the rental yield in Taipei is around 5 percent.

"The market in Shanghai is growing very fast," said Wang. "The Taipei market is improving, but the gap is still there."

Low rental yields in Taipei are the result of inflated property prices, which have remained high since rampant speculation during the 1980s. The Taipei office market may not improve anytime soon.

Colliers Jardine reported that the office-vacancy rate in Taipei increased from 2.83 percent in 2000 to 8.35 percent by the end of last year, with oversupply expected to continue until 2004.