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Focus: High speed rail fueling property price rises

Last May, Sabrina Su (蘇玉娟) opted to buy a 55-ping (181.5m2) apartment off plan in a housing project in Banciao (板橋), Taipei County, for NT$16 million (US$489,446).

"I am bullish about the outlook for the property market in Banciao, which is expected to benefit from the bullet train after it starts operation," Su said.

Before making the purchase, the 53-year-old housewife had spent nearly one year looking for a house, considering properties in Neihu (內湖), Yonghe (永和), Sindian (新店) and other nearby areas.

In Banciao a combined train station for the high speed rail, conventional railway, rapid transit and future express to the Taiwan Taoyuan International Airport, will see busy traffic that will hopefully bring business opportunities and lift property value, Su said.

The long-awaited high speed rail service that finally started operations this month is one of the factors behind a rising real estate market in recent years.

"Bullet trains always positively affect property in the neighborhoods in the long-run," said Bruce Ebnother, senior portfolio manager with UBS Global Asset Management (Americas) Inc.

An industry veteran, Ebnother oversees the UBS Asian Real Estate Securities Fund and is interested in investing in Taiwan's developer stocks.

However, it is possible that only a few areas close to the high speed rail stops such as Banciao will benefit, given that most of the stations are located away from city centers.

According to Evertrust Rehouse's (永慶房屋) survey, 31 percent of people think that the Banciao station area has the highest appreciation potential. Fifteen percent believed Wujih Township (烏日) in Taichung County had the highest potential.

Eleven percent of survey respondents rated Lioujia Village (六家) in Hsinchu County, Chinpu (青埔) in Taoyuan County, Taipei Main Station in Taipei City and Tsoying (左營) in Kaohsiung City as having the highest potential.

"The launch of the bullet train service this month will obviously boost our sales," said Joan Chen (陳怡靜), a sales representative at Yuan Lih Group (元利建設).

Yuan Lih has begun promoting a second housing project close to Banciao Station and has sold most of the 300 odd apartments on offer, she said.

Prices range from NT$380,000 per ping to NT$400,000 per ping, up more than 25 percent from less than one year ago, when Su bought her apartment from Yuan Li's first housing project.

But some wonder whether the launch of the high speed train is enough to sustain the nation's soaring realty sector after a government report released last month predicted a slump in the housing market.

The report, authorized by the Ministry of Interior, showed that up to 35 percent of polled developers, brokers and financial institutions expected a downward trend in the housing market, given a short-term supply glut, increasing investment by speculators and climbing interest rates.

"We think the neighborhoods with bullet train stops could be immune to the downside if there is any," said Victor Chang (張欣民), director of the research and development division at Sinyi Real Estate Inc (信義房屋), the nation's biggest housing agent.

Chang said he was cautiously bullish about the market and expected a stable growth in price and the number of housing projects launched this year.

Chang said the difficulties with ticketing services for the high speed rail were "trivial problems, not crucial, and will not have a negative impact on the property market," he said.

Sinyi identified the land around Nangang (南港) Station, Banciao Station and Tsoying Station, which are all complexes designed to combine bullet train, conventional railway and rapid transit services, as prime property.

The broker predicted the average property price would increase by 30 percent in Nangang (from NT$300,000 per ping) by 10 percent in Banciao (from NT$360,000 per ping) within the next 12 months.

Chang said it was a good time to buy a houses, but that speculators would need to watch out for rising risks.

In general, the high-speed rail service would bring more and quicker benefits to the real estate market in the north of Taiwan rather than the south, he said.

Stocks benefitting from the launch of the high speed rail include Taiwan Fertilizer Co (台肥) and Far Eastern Textile Co (遠紡), which own land in station districts like Nangang and Banciao, and Mega International Investment Services (兆豐國際投顧).

Macquarie Equity Research tipped Continental Engineering Corp (大陸工程), which is working with Formosan Rubber Inc (厚生) to develop land for residential use near Banciao Station.
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