Taipei City’s commercial property prices, including office rentals, are expected to nosedive in the first half of this year from last quarter’s peak, real estate consultancy firm DTZ (戴德梁行) said yesterday.
DTZ also anticipated a buying freeze on residential properties nationwide.
“This will be a long, cloudy winter and no recovery is in sight in the near future,” DTZ general manager Billy Yen (顏炳立) told an outlook briefing yesterday. “Some properties are like zombies that no one wants to buy.”
Making things worse, the nation’s incorporation of International Accounting Standard No. 10 this month, which requires publicly traded developers to follow market-to-market accounting rules, will cut “approximately 20 percent in profits” from the value of their inventories on last year’s balance sheets, said Charlie Yang (楊長達), director of real estate appraisal for DTZ.
Developers with tight liquidity may soon run into financial difficulties, although government-guided loan rollover may give them a helping hand in the short run, Yen said.
In view of the dire situation, price cuts will be the only effective incentive to attract buyers, he said.
As for grade-A office rentals, Jessica Lu (盧佳青), manager of the firm’s global corporate services, estimated that a drop of between 5 percent and 10 percent in monthly rental prices may be inevitable in the first quarter, following a rise of 2.9 percent last quarter year-on-year to an average of NT$2,418 (US$73.30) per ping (3.3m²).
The market’s vacancy rate, at 7.2 percent last quarter, will see an uptick this quarter as foreign companies enforce cost-down strategies, she said, adding that Taipei 101 alone had 14,000 ping of vacant office space out of the city’s total of 533,000 ping.
Domestic companies, including small and medium-sized enterprises (SMEs), will also tighten their belts and relocate to Taipei’s grade-B industrial offices, said Christine Wu (吳富芸), manager of DTZ’s agency department.
Wu estimated that tenants in grade-B office spaces would have up to a 20 percent bargaining chip to negotiate rentals this quarter, while rental prices for retail shops would also see a cut of 10 percent to 15 percent as supply shoots up this year.
Big-time buyers of commercial properties, domestic or foreign, have also been hesitant to close deals, which guarantee no fixed incomes, since November, said Phyllis Hsiao (蕭佩宸), another agency department manager, at yesterday’s media briefing.
Foreign buyers bought NT$19.8 billion in commercial properties last year, or 21 percent of the value of all closed deals — down from NT$44.5 billion in 2007, she said.
Few foreign investors are interested in large-sum properties, which no longer provide one-shot capital gain as the market moves into a downtrend, but they are poised to buy non-performing property collateral if mortgage defaults emerge, Yen said.
A few domestic buyers such as life insurers, however, are hunting for office buildings with profit potential or industrial and office park areas such as in Neihu District (內湖), which will generate a steady return of more than 4.5 percent, Hsiao said.