Bucking the main bourse’s bearish sentiment, property shares surged yesterday after Fubon Life Assurance Co (富邦人壽) a day earlier won a government auction for a plot of land in Taipei’s Xinyi District (信義).
The building material and construction subindex, which reflects the general share performance in the real estate sector, rose 3.28 percent, compared with a decline of 0.86 percent on the benchmark TAIEX, the Taiwan Stock Exchange’s data showed.
With an offer of NT$3.68 billion (US$113.5 million), Fubon Life won 50-year leasing rights for the 1,927 ping (6,373m²) lot adjacent to Shin Kong Mitsukoshi Department Store’s (新光三越百貨) Xinyi branch, the company said in a stock exchange filing.
The price offered by Fubon Life was 1.5 percent higher than the government’s floor price and only NT$51 million more than the only other bidder, Shin Kong Life Insurance Co (新光人壽).
The auction could help the real estate sector in the short term, a Citigroup analyst said.
“We think the result is neutral to slightly positive, as expectations were already low — and at least the auction didn’t fail,” Andre Chang (張致竑), an analyst at Citi Investment Research in Taipei, wrote in a client note yesterday.
During yesterday’s session, shares of Shining Group (鄉林集團), Farglory Land Development Co (遠雄建設), Huang Hsiang Construction Corp (皇翔建設) and Hung Sheng Construction Ltd (宏盛建設) closed limit-up, with investors confident of demand in the real estate market after the auction results.
“The re-zoned area in Xinyi is the most prime location for commercial and residential properties in Taiwan ... Also, this is the first auction reflecting the new government’s policy to sell leases rather than ownership rights for large parcels of land,” Chang wrote in the note.
Other real estate stocks, such as Radium Life Tech Co (日勝生), Highwealth Construction Corp (興富發建設), Kee Tai Real Estate Co (基泰建設), Kuoyang Construction Co (國揚建設) and Chainqui Development Co (全坤興) also saw share prices surge by nearly 7 percent, while Fubon Life’s parent company Fubon Financial Holding Co (富邦金控) saw its stock fall 0.26 percent.
Investors’ optimism may be short-lived, however, after several market analysts warned that the market would probably weaken further in the medium to long-term on the back of slowing domestic consumption.
Chang said the auction result suggested that land prices were unlikely to fall and the real estate sector should be stable for a while “as long as the overall stock market remains stable.”
“However, [the fact that there were] only two buyers and the thin premium over the floor price suggest that industry players are still cautious about the market outlook, although basic demand and confidence in the long-run still exist,” Chang said.
“The market will take at least six to 12 months to recover,” Chang said.
So far this year, the building material and construction subindex has plunged 51.52 percent, underperforming the TAIEX’s 38.33 percent decline.
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