Taipei Times: Market analysts have mixed views about an upcoming recovery in the local property market. Some say low home prices and low interest rates will soon attract investors to inject money into the market while others say an oversupply still spells difficulties to prop up a sluggish market. What do you think?
Billy Yen (
Recently closed deals are mostly low-priced properties and the recent market boom is purely a result of government stimulus policies since consumers need less cash to pay up loans. This doesn't make for a market recovery. Besides, over 80 percent of the nation's adult population already owns a home, which leaves only 15 percent [of the adult population] needing homes in an oversupplied market.
If 15 percent of the population purchases homes later, the game's over in the property market and then prices may drop further. So, reality bites because there will be indefinite non-performing collaterals locating limited buyers. Most foreign banks are more aware of the market reality than local banks and react very efficiently in grabbing the remaining 15 percent of demand. I'm afraid that local banks, which are still hesitant in releasing non-performing collaterals for sale, may meet further setbacks in the market.
TT: How effective are your bank clients when liquidating their non-performing assets via private auctions?
Yen: It usually takes one year for banks' non-performing assets to go through four court auctions before they are showcased on private auctions. After failing four court auctions in a year, the prices are expected to drop by 20 percent in value. On average, closing prices on private auctions are around 50 to 80 percent of objects in market value. So, time is money here -- banks have to deal with their impaired assets.
I'd like to give a harsh warning to some local banks, which are still expecting a U-turn recovery in the property market -- no signs of a strong recovery are foreseeable within the next three to five years according to our practical analysis. The later banks plan to sell off impaired assets, the less return can be generated.
The DTZ has held 17 auctions in the past year, our experience shows that banks can only have a return of between one fourth to one third of their lending loans. And 20 to 30 percent of the nation's nearly NT$2 trillion in bad loans -- some NT$600 billion -- are expected to enter the market for sale soon.
TT: For potential home buyers, private auctions seem to have replaced conventional real estate brokers and become one of their channels to shop for new houses. What tips do you have for them to get bargains?
Yen: Unlike those in court auctions, [non-performing] objects sold in private auctions won't bring any further risks to buyers since banks have previously taken care of legal nuisances before bidding. And interested bidders can check on the houses before the auction. After winning the bid, buyers don't have to pay up the total sum within a week and home loans may be granted pending a confirmation of the buyer's bank credit.
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