The nation's property investment trust market may quadruple in five years as new measures including tax incentives boost demand, the securities regulator said.
The property trust market this year will probably reach US$1.6 billion through five new share sales, said Lin Tung-Liang (林棟樑), director of monetary affairs at the Financial Supervisory Commission.
The amount may reach US$6 billion in 2009, he said.
"Tax incentives, along with a lot of liquidity in the market, will help boost growth of these products," Lin said in an interview on Monday at a conference in Singapore. "Investors would also invest in them because they offer more stability than stocks."
Property trusts are set up by landlords, with most of the rental income from buildings such as offices, hotels and hospitals distributed to shareholders as dividends. Property prices rose 11 percent last year on lower land value incremental taxes -- which refer to the capital gains taxes on land sales and low interest rates, Sinyi Realty Co (信義房屋), the nation's largest realtor, said in a January report.
The central bank had cut the rate 15 times starting from December 2000 to a record 1.375 percent by June 2003, helping the economy bounce back from recession in 2001 to achieve growth of 5.7 percent last year.
In March, shares of Fubon No.1 1 Reit rose as much as the maximum 7 percent daily limit on its trading debut as investors bet on growth in the property market.
Cathay Financial Holding Co (國泰金控), the nation's biggest financial services company, said on May 6 that it would sell a property trust to raise NT$14 billion (US$450 million) in the third quarter. It said it has more than NT$1.2 trillion of assets that can be securitized, including more than NT$100 billion in property.
International Commercial Bank of China (中國商銀), a unit of Mega Financial Holding Co (兆豐金控), said on May 24 that it planned in the second half to sell NT$70 billion of asset-backed securities, including NT$5 billion to NT$10 billion from a property trust.
The legislature further cut the land value incremental tax earlier this year, extending a three-year measure to boost the property market once swamped by 1.2 million excess homes built during a real-estate boom in the 1980s.
The government has also waived transaction taxes for property trusts and fixed the tax on income at 6 percent, Lin said.
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