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Property market could overheat

After seeing record growth last year, the local commercial property market may overheat this year if prices rise to an unreasonable level, which could put an end to ongoing deals, a local realtor said yesterday.

"Demand has doubled and there's also plenty of supply. But, as always, pricing determines whether deals can be closed if property owners keep raising prices," said Tony Chao (趙正義), managing director of real estate services provider Jones Lang LaSalle Taiwan.

"There are many [international] buyers out there betting on the upside of the implementation of direct cross-strait links after the March election and potential gains from a stronger New Taiwan dollar," Chao said.

Following the government's decision last week to allow Chinese investments in the local commercial property market, the local market may see another 50 percent growth this year, he said.

DIFFERENT VIEW

But Hong Van (雲惟鴻), managing director of CB Richard Ellis Ltd (CBRE, 世邦魏理世), held a different view.

"There are many speculative players betting on post-election prospects, but, compared to other Asian cities, commercial buildings in Taipei have been under-priced and are unlikely to overheat soon," he said.

He also doubted that Chinese investors would be more interested in Taipei properties, which average a 6 percent yield than properties in Shanghai and Beijing, which have a 20 percent to 30 percent yield.

Jones Lang LaSalle's statistics, released on Feb. 21, showed that foreign investments, worth more than NT$500 million (US$16.16 million), in local commercial property saw a record 50 percent year-on-year growth to NT$87 billion last year, half of which were made by non-Asian buyers.

Total deals finalized last year might exceed NT$100 billion, Chao said, adding that the company expects to see more deals closed in the second half of this year after having just closed "one big deal" last week.

He said that the demand in Asian commercial property has strengthened since late last year after investors shied away from the US and European markets, which were seriously hit by the subprime crisis.

A 27 percent increase from 2006, or US$121 billion, was pumped into Asian commercial property last year, the company's statistics showed, compared with 8.4 percent growth, a total value of US$759 billion for last year, in commercial markets globally.

UPBEAT

Van, nevertheless, is as upbeat about prospects for the commercial property market this year, saying that the local property market has a great potential for profit.

CBRE's report, released on Jan. 29, found that the office building rental market in Taipei saw growth both in the take-up rate and monthly rentals.

The vacancy rate in Taipei's office buildings dropped to a low of 8.05 percent in the fourth quarter with monthly rentals for grade A offices seeing 1.8 percent year-on-year to average at NT$2,352 per ping, the company's report said.
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