Property market may remain slow

The outlook for the local property market is weak for the next two quarters, with unfavorable economic fundamentals and the sell-off of impaired bank assets still weighing on the market, a government survey said yesterday.

The survey, conducted by the Architecture and Building Research Institute (建築研究所) under the Ministry of the Interior, said that while nation's property market has shown modest signs of recovery, that momentum may lose steam in the next two quarters.

"The pace of recovery was slowing because of a lackluster recovery in macroeconomics and potential pressure from the sell-off of impaired assets," said Chang Chin-oh (張金鍔), professor of economics at National Chengchi University.

Chang said industry pundits remain pessimistic about real-estate prices over the next two quarters amid expectations that the government may continue to offer preferential mortgage loans to spur purchases by new homebuyers.

According to government statistics, more than 60 percent of the nation's NT$1.53 trillion in non-performing loans held by banks were collateralized with real estate as of the end of June. In a bid to accelerate a clean-up of their balance sheets, banks have begun selling off their non-performing loans to asset management companies (AMC).

As the push to rid banks of bad debts gains momentum, it will put great pressure on property prices, said Chuang Meng-han (莊孟翰), an economics professor at Tamkang University.

"While the government is initiating new policies to stabilize the market -- be it lifting decade-long restrictions on foreign nationals and companies purchasing property in Taiwan or reducing the land value increment tax by 50 percent -- the market may not rebound anytime soon once AMCs starts to sell off their assets," Chuang said.

Since last summer, real estate prices in Taipei have dropped by 15 percent, while those in central and southern Taiwan have also dropped by almost 40 to 50 percent, according to DTZ Debenham Tie Leung (戴德梁行).

"With an oversupply and a market recession, prices are sure to decline. But psychologically, the public is also anticipating that AMCs will offer much lower prices [and are putting off purchases]," said Wendy Hsueh (薛惠珍), director of research at DTZ, whose firm has helped Taiwan banks auction off 610 housing units as of last week, with total sales of some NT$930 million.

But one industry veteran said the sell-off of impaired assets, especially those by AMCs, will not have much impact on the already stagnant real-estate market.

"There will be three different property categories in the market -- newly built properties by developers, previously-owned units resold by brokers and impaired assets introduced by banks and AMCs," said Victor Chang (張欣民), a manager with Sinyi Real Estate Inc (信義房屋).

"While buyers search for lower prices, they are also looking for better quality units and in better locations before they actually put down their money," Chang said. "Those sold by AMCs are not falling into that category."

Another pundit said that demand will determine the market's future, not AMCs.

The public has lost confidence in the real-estate market. The sluggish economy and rising unemployment has only added more uncertainty, said Yin Chih-teh (應致德), secretary general of Taiwan Province Architecture and Development Association (台灣省建築開發公會).