Mon, Sep 08, 2003 - Page 11 News List

Property market hoping law will prompt recovery

The nation's property market hasn't been able to recover from the burst of the asset bubble in the 1990s. The real estate sector is now pinning its hopes on the Real Estate Securitization Statute enacted in July. Last week, Chao Teng-hsiung, chairman of the Federation of the Real Estate Development Association, ROC, spoke with `Taipei Times' staff reporter Joyce Huang about the importance of the law and prospects for the property market

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Chao Teng-hsiung, chairman of the Federation of the Real Estate Development Association, ROC, believes the Real Estate Securitization Statute will help the property sector recover.

PHOTO: GEORGE TSORNG, TAIPEI TIMES

Taipei Times: Does recent heated buying signify that the sluggish property market is about to recover?

Chao Teng-hsiung (趙藤雄): The property market has been experiencing recession for almost 13 years, which has caused property prices from the level they were about 20 years ago. The recession is a result of a lack of economic confidence following people's uncertainties about the nation's political stability, cross-strait relations and economic recovery. Due to their uncertainties, many people have delayed their decisions to buy houses here, while some have bought houses in China.

But property prices couldn't be any lower. We have begun to see a recovery in confidence now that the government has kick-started several stimulus measures including preferential loans, the real estate-backed securitization law and the halving of the incremental land-value tax. Therefore, housing sales are expected to rise by up to 50 percent, which will gradually bring up prices. As a matter of fact, prices of land, raw materials and steel are soaring to slightly boost property prices by, say, some NT$3,000 to NT$10,000 [per ping] in some areas.

TT: While you are very optimistic about the property market, some economists said the actual recovery will arrive in the second quarter of 2004. Do you agree?

Chao: Properties in central and southern Taiwan are cheaper than those in China, which means investors will see a lot of room to increase profit margins if prices go up. Locally or globally, the economy will do better next year than this year, which is sure to revitalize the property market especially when the prices are low and the government is launching measures to boost the market and the economy. I am sure the property market will gradually recover early next year. After the government implements the three direct cross-strait (transportation, postal and trade) links, hopefully next year, the property market will boom in two years's time.

TT: How will the three links contribute to a property-market boom?

Chao: Many businesses have been looking forward to the opening-up of three links so that they can benefit from China's emerging markets. If the three links are in place, some 300,000 Taiwanese families, which have bought houses there, may consider moving back given the fact that Taiwan's qualify of life and security is much better than in China. Many mainland Chinese, if allowed, may also be interested in buying houses here since prices are low. China-based Taiwanese businessmen no longer need to settle down in China since they can make China-bound round trips in one day.

TT: The sector is tying its hopes to the recent passage of the Real Estate Securitization Statute (不動產證券化條例), which is designed to revive the property market. But what is real estate-backed securitization? How much do you think investors will be interested in buying these assets?

Chao: The statute is one of the many stimulus measures the government is offering, but it is the most helpful tool in my view. Securitization of real estate refers to the process of converting properties into marketable equities for sale to investors. From the point of view of investors, they can now become shareholders of multi-million-dollar skyscrapers with a small amount of money and benefit from the profit-making building's annual revenues and dividends. They can now invest in something they couldn't afford in the past in the form of shares. Under the statute, individual real-estate owners and developers can entrust authorized investment trust companies to issue the beneficiary certificates and professional appraisers to come up with an [objective] valuation before selling the real estate-back securities to investors.

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