Fri, Jun 29, 2007 - Page 12 News List

Property market may contract: report

SLOWDOWN AHEAD With the index of leading property indicators falling and banks tightening credit, a property expert advised the public to think twice before investing

By Jackie Lin  /  STAFF REPORTER

The property market is expected to slow down in the next few quarters in light of bank moves to tighten housing loans, a government report said yesterday.

A composite index measuring the housing market in the previous quarter -- which was unchanged at 12 points from the first quarter and flashed a steady "green light" for the sixth consecutive quarter -- showed the market was stable overall, said the report issued by the Architecture and Building Research Institute under the Ministry of the Interior.

However, the index of leading property indicators, which projects market conditions three quarters ahead, fell 1.1 percent to 104.23 points as its five sub-indices -- including the property stock index, consumer price index and monetary supply -- all showed decreases.

This was the index's first decline in four quarters, hinting that the market might contract in the near term, the report's author, Chang Chin-oh (張金鶚), professor of land economics at National Chengchi University, said at a press conference.

The index of coincident indicators, which includes standard lending rates and standard unit prices of new housing projects, dropped 0.4 percent to 95.88 points, indicating stability, he said.

To better understand the market, the institute conducted a survey of construction companies, real estate brokers, financial institutions and other property-related industries between May 10 and May 31.

The survey revealed a conservative overview of market prospects in the second and third quarters.

The poll showed that only 13.4 percent of respondents were positive about the market outlook for the third quarter, while 41.6 percent expected the market would go down and the remaining 45.1 percent said the market would remain unchanged.

Companies in central Taiwan were more optimistic about the market outlook, compared to their counterparts in the north and south. This ran counter to the historical trend of companies in the north being more bullish.

The report also showed that more than 85 percent of property-related firms said they were worried that banks' decisions to tighten housing loans -- especially after being warned by the Financial Supervisory Commission -- could have impact on the market.

"Together with the central bank's continual approach to rate hikes, these two elements would gradually have a cooling effect on the sizzling [property] sector. Consumers, especially first-time homebuyers, should do their homework first," Chang said.

His remarks, however, posed a big contrast to a front-page story in the Chinese-language Economic Daily News yesterday, which reported that the housing market in northern Taiwan would see the launch of nearly NT$100 billion (US$3 billion) worth of new projects in the second half of the year, up 30 percent from a year earlier.

Citing a real estate magazine's report, the newspaper said construction companies were confident that the government would approve direct links with China, relax regulations on Chinese tourists and implement friendly policies to encourage capital inflow in the runup to the presidential election next year.

"I'm very surprised to see the story ran on the front page. I'm worried that consumers might be misled into making wrong decisions," Chang said.

Chang said it was understandable that developers would like to launch their projects ahead of elections, which tend to dampen consumption sentiment.

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