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FEATURE : Mixed views on opening of real estate to China

Thirty-nine-year-old Huang Chih-chia (黃志佳) earned NT$1 million (US$30,000) from a property sale four years ago and has been following the sector’s ups and downs ever since.

For the full-time construction engineer, residential properties are “the best” investment targets. Huang had bought two newly built apartments in Sinjhuang (新莊), Taipei County, and a four-bedroom apartment in Linkou (林口), Taipei County, for his own use in the past two years for more than NT$15 million.

Huang planned to sell the refurbished apartments for a profit after a new president came to power. However, with the economic downturn driving the real estate sector down, he had to rethink his plans.

Huang put both the Sinjhuang apartments up for rent and has been counting on monthly rentals to repay mortgages.

“Rental income still gives me a 3 percent return [on my property investments], higher than interest earnings from time deposits if I were to put the money in the bank,” he said.

His next goal is to look for a bargain property in Taipei City, hoping to reap the benefits when the market rebounds given the government’s plan to open the sector to Chinese investment.

The opening will be “a shot in the arm for the property market in years to come,” Huang said.

Like Huang, property tycoon Chao Teng-hsiung (趙藤雄), chairman of Farglory Group (遠雄集團), expects sales to boom when the property market is opened to Chinese buyers.

Speculation on market liberalization has already enticed some home shoppers.

“We’ve seen sales more than double this month, compared with April,” Chao said on Wednesday.

Once the government gives the go-ahead, Farglory will form a joint venture with Country Garden Holdings Co (碧桂園) from China and undertake their first housing project there “by the year’s end at the earliest,” he said.

In Taiwan, Farglory is seeking to buy land in Taipei, Taoyuan and Hsinchu counties to launch new community development projects with its future Chinese business partner, Chao said, urging the government to accelerate its market-opening policies.

Chuang Meng-han (莊孟翰), professor of industrial economics at Tamkang University, warns of the risks of potential capital injection or the inflow of “hot money” from China.

“The news [on opening to Chinese investors] has already provided a boost to domestic property prices, which would otherwise have declined to a more reasonable level and benefited more domestic home buyers,” he said.

Rising property foreclosures in recent months run counter to arguments that property prices have become affordable to the middle class, he said.

Although Taiwan has a high home ownership rate of about 85 percent, Chuang said most home owners are the rich, who own more than one property while the majority can’t afford to buy a house.

The professor urged the government to keep Chinese investors out of the local residential real-estate sector, while encouraging them to invest in the retail and commercial property market.

“These pro-China policies may provide a boost to the nation’s economic growth, but will likely hurt the socially disadvantaged,” whose dream of owning a home would become even harder to realize if Chinese property speculators were allowed in, he said.

Chuang said domestic retail and commercial properties could witness a boom “in the second half of this year at the latest” when Chinese buyers enter the market.

Kevin Peng (彭培業), CEO of Taiwan Realty (台灣房屋), forecast an up to 50 percent hike in commercial property prices in Taipei City’s seven major business districts after Chinese investors are allowed to invest.

Peng was most optimistic about commercial properties, including office buildings and storefronts along Dunhua N Road, which currently sell for about NT$700,000 per ping or rent for NT$4,000 per ping.

With the support of office workers in the area and the residential crowd, “the storefronts may see a hike of between 30 percent and 50 percent in the next three years,” Peng told an outlook briefing on Wednesday.

The upscale Xinyi District (信義), where several big-name department stores and shopping malls are located, may be competitive in attracting businesses, but storefronts nearby hardly benefit as crowds of shoppers are concentrated on the main street, Peng said.

Peng predicted a small price hike of between 5 percent and 10 percent in three years for the district.
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