Analysts predict housing-market slump

The nation's property market is likely to see a downturn, as JP Morgan Chase & Co warned of a possible "glut pressure" to emerge in the presales segment in the second half of next year, in the wake of the continuous rollout of new projects by developers.

"With the fast-growing number of new projects launched by developers, we see potential oversupply pressure in the primary market, especially in central and southern Taiwan, in the second or third quarter of 2006," JP Morgan's analyst Nick Lai, who tracks Taiwan's property and construction sectors, said in a report released last week.

The demand in the presales market is estimated at between 70,000 and 75,000 households, which usually account for 15 percent of total market demand, while the number of new houses to be completed next year is expected to exceed 100,000 units, as home builders are likely to keep launching new projects throughout the year, he said.

Meanwhile, growth in the secondary market is slowing down with a growth rate of 3 percent to 5 percent this year, compared to a high base of 19 percent last year, and will remain at a flat yet healthy level of around 440,000 units next year, Lai said.

Subject to the likely oversupply and decelerating growth, overall housing prices could stay flat next year, while there could be a downward price correction of 5 percent to 15 percent for presales markets outside the greater Taipei area where less glut pressure is expected, the analyst said.

A developer expressed similar concerns, as Kindom Construction Corp's (冠德建設) chairman Timothy Ma (馬玉山) reportedly said last week that oversupply could loom large in 2007, if the number of new projects next year matches those over the last two years.

As of August this year, the nation's Construction and Planning Agency under the Ministry of the Interior issued 81,274 housing construction permits, according to the authority's latest available statistics.

Ma predicted that the total permits issued this year could exceed 100,000, compared with around 110,000 last year.

Despite the seeming pessimism, builders like Far Glory Group's (遠雄企業團) chairman Chao Teng-hsiung (趙藤雄) said that, in line with the current optimism about the prospects of the local real-estate market, they planned to launch housing projects worth NT$45 billion next year, like they have done this year.

Echoing Chao, Lai Cheng-i (賴正鎰), chairman of the Taiwan Construction Development Federation (台灣省建築開發公會), said he expec-ted the nation's property market to keep prospering in the next six years, driven by the opening-up of the nation to Chinese visitors as well as direct flights across the Taiwan Strait that are likely to become a reality in the not too distant future.