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Slower economy hits real-estate outlook

A panoramic view of Taipei's Neihu District shows how the area has become increasingly densely populated. Overall house and office rental has risen by nearly 10 percent over the past six months. A government report released yesterday indicated that the composite index for the nation's property market slid in the second quarter. PHOTO: LU CHING-MIN, TAIPEI TIMES

Depressed by the dull economic outlook for the last half of the year, Taiwan's property market, which has already seen lackluster performance this year, is likely to continue to slow, market watchers said yesterday.

The composite index for the nation's property market in the second quarter of the year slid 0.08 percent from the first quarter to 96.47 points, indicating there has been steady growth for eight consecutive quarters, according to a report released by the Architecture and Building Research Institute under the interior ministry yesterday.

But the figure is likely to further decline through the end of the year, as 37.27 percent of builders, real estate agents and lenders polled said the market will see a downturn in the fourth quarter of the year, while only 12.73 percent expressed optimism.

"The slower economy, as well as rising oil and consumer prices, add more cost pressure for construction firms, and dampen buyer interest given rising prices," said Chang Chin-oh (張金鶚), professor of land economics at National Chengchi University, who co-authored the report.

The news is not all bad, because the market will move toward becoming more balanced after the oversupply of this year, said Ting Yu-chun (丁育群), director of the institute.

"Home builders finally started to become cautious, showing conservatism from the perspective of sales, prices and time to conclude a deal," Ting said.

Negative factors that could further dampen the market include the expected increase in interest rates and concerns over a property-price bubble around the world, Ting said.

But he said investors need not be overly pessimistic about the sector, as there are still factors that could benefit the market, including the implementation of real-estate securitization, which could raise more funds for the sector, tax incentives from the government, and urban renewal projects.

Against this backdrop, home buyers need to do more homework to choose the best deal, while property investors should hold back on investing until prices go up, Chang suggested.
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