REIT demand outstrips supply: Cathay Financial

Cathay Financial Holding Co (國泰金控), the nation's biggest financial services company, said its NT$13.9 billion (US$424 million) real estate investment trust (REIT) drew more than three times that amount in demand.

Investors sought NT$49 billion of shares in Cathay Financial's first real estate investment trust (REIT), the company said in a statement yesterday.

The REIT is expected to start trading on the Taiwan Stock Exchange late this month or early next month, the statement said.

Real-estate investment trusts, which own properties such as offices, hotels and hospitals, pay out almost all the income they earn in dividends, making them attractive to investors seeking regular returns with the possibility of capital gains.

The property market boomed last year on lower capital gains taxes on land sales and low interest rates. But a Council for Economic Planning and Development report showed that the composite confidence in housing prices dropped to 100.53 points in the second quarter of this year, the lowest since the third quarter of 2003, when SARS was ravaging the country.

Home mortgages as a share of family income, however, have risen for the seventh quarter in a row, an indication that housing prices may be approaching a peak, said the Report on the Changes in Taiwan's Housing Demands, which was released on Tuesday.

The report noted that nationally in the second quarter, house buyers were paying 629 percent of their annual income to buy a house, and mortgage payments accounted for 29 percent of their monthly income, an increase of 2.9 percent over the same period of last year and the seventh consecutive quarterly increase.

The report said the average space for negotiating the price of a house during the second quarter of this year has gone up to 10.5 percent, up 0.8 percent from the previous quarter and a two-year high.

Another indicator that a buyer's market exists is that the average time used to look for a residence has lengthened to 4.7 months, as buyers have turned more hesitant.

On their views of housing prices in the coming year, 30.4 percent of surveyed house buyers said it will rise, while 29.7 percent said it will fall, still another indication that house buyers are becoming more reserved about the housing market, said the report.

But for the near future, 32.1 percent of those who have bought a house said housing prices will go up, with only 14.7 percent saying that they will go down.

The report surveyed house buyers, real-estate agents and banks nationwide from July 1-15, receiving 2,964 valid responses. The margin of error was around 3 percent.