Sat, Jan 01, 2005 - Page 10 News List

Real-estate sector unfazed by updated interest rates

By Amber Chung  /  STAFF REPORTER

The nation's real-estate industry seemed to hold neutral views on the central bank's interest rate hikes, although major construction shares fell yesterday on the local bourse.

"The bank's two rates hikes, totaling 0.375 percentage points, remains bearable to the market, given the relatively low base of interest rates for the moment," Victor Chang (張欣民), director of the research and development division at Sinyi Real Estate Inc (信義房屋), said in a phone interview yesterday.

The moderate increases have not presented a significant burden to people intending to purchase property, Chang said.

Another industry veteran said that the central bank's move would instead raise people's expectations about inflation, which would encourage them to invest in real estate in a bid to preserve the value of their assets.

The appreciating NT dollar is also expected to draw some money into the property sector, said Yin Chih-teh (應致德), secretary-general of the Taiwan Province Architecture and Development Association (台灣省建築開發公會).

"The two combined forces are expected to offset the potential impact caused by the mild interest-rate hikes," Yin said.

Despite the sector's bullish views, construction shares yesterday suffered a minor decline of 0.98 percent on the local bourse, after the central bank said on Thursday that it would adopt more measured rate hikes in the upcoming year to curb inflation.

Cathay Real Estate Development Co (國泰建設) closed 1.51 percent lower at NT$19.60.

"We expected the central bank to raise interest rates by between 0.75 percentage points and 1 percentage points in 2005, which could lead to negative influence on the property sector," Chang said.

The impact may not occur until in the second half of the year, he said.

However, people's expectation for rising interest rates could spark a purchasing spree before more hikes materialize to increase house buyers' burden, Chang said.

According to an online survey conducted by housing agent Evertrust Rehouse Co (永慶房屋) between Nov. 20 and Nov. 29, an increase of 1 percentage point could discourage as many as 53 percent of house buyers.

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