Sat, Jul 03, 2004 - Page 10 News List

US Fed's move unlikely to impact real estate sector

By Amber Chung  /  STAFF REPORTER

The US Federal Reserve's move to raise interest rates this week is not expected to have much of an impact on the nation's recovering real estate sector, industry insiders said yesterday.

But speculation about a possible rise in the nation's interest rates may spur sales of houses before the adjustment materializes, they said.

"The interest rate hike by the US could trigger people's speculation that Taiwan may follow suit as well, which could cause some homebuyers to wait and see how things go," said Victor Chang (張欣民), director of the research and development division at Sinyi Real Estate Inc (信義房屋).

But the property market may not see a huge impact since this group is estimated to make up only 5 percent of total homebuyers, he said.

Chen Yun-ru (陳韻如), manager of public relations and research at Evertrust Rehouse Co (永慶房屋), agreed, saying that a minor rise in interest rates would not create a huge burden for homebuyers.

Take adjustable-rate mortgage schemes. People who borrowed NT$1 million from banks on 20-year loans with a common interest rate of 2.5 percent would only pay about NT$100 more per month if interest rates should rise by 0.25 percentage point in the future, Chen said.

Both Chang and Chen said that people's anticipation of rising interest rates could actually encourage homebuyers to place orders now rather than waiting to see if there is actually a hike.

The Fed raised interest rates by a quarter percentage point on Wednesday, which many analysts feel was likely to be the first of several increases.

In a statement, the Fed pledged to take a gradual pace in adjusting interest rates upward, which analysts have taken to indicate a course of smaller, quarter-point increases.

Taiwan's central bank said last week that it would maintain interest rates at current levels for the time being.

Chang said he expects the central bank to raise rates in the fourth quarter.

"But we do not expect the recovering real estate market to see a huge impact from such a move unless the interest rates rise over 1 percentage point by the end of this year," he said.

Following in the footsteps of the economic upturn in the fourth quarter of last year, the property market has started to recover after being dragged down by soaring construction materials prices.

Lai Cheng-i (賴正鎰), chairman of the Taiwan Construction Development Federation (台灣省建築開發公會), said earlier this month that some NT$100 billion worth of new properties are expected to be released in the third quarter, a 30 percent rise from the same quarter last year.

The interest rate increases indicated an economic rebound and, as a result, stronger purchasing power, which could encourage people to invest in the property market, said Susan Liu (劉若玫), spokesperson of the Taipei-based Huaku Construction Co (華固建設).

With confidence in the reviving real estate industry, the company is scheduled to launch two projects worth NT$4 billion in Taipei in the second half of this year, Liu said.

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