The commercial property market in the greater Taipei area is expected to see a boost after the Financial Supervisory Commission relaxes restrictions on property investments by domestic insurance companies, realtors said yesterday.
But an academic yesterday said that the planned capital deregulation, which could take effect as early as this month, along with recent pro-China policies, would increase property prices, which will end up working against local home buyers.
“Along with weakened economic fundamentals, the property market was supposed to have experienced downward corrections. These, however, were interrupted by this favorable news,” Chuang Meng-han (莊孟翰), an associate professor of economics at Tamkang University, said yesterday by telephone.
Property prices in the eastern district of Taipei, such as the upscale Xinyi District (信義) and Neihu District (內湖), have irrationally more than doubled in a short time, he said, adding that no property prices should have gone up by more than 30 percent in less than three years.
Chuang said that the nation’s economic fundamentals, per capita GDP and household incomes haven’t grown enough to support any property boom or price hikes.
He said that Taiwan should learn lessons from the burst of capital-driven property bubbles in Japan in the early 1990s and in Hong Kong after 2000 when equity and property prices greatly fluctuated.
Realtors welcomed the policies to prop up the market.
Lee Jain-ming (李健銘), a researcher at Sinyi Real Estate Inc (信義房屋), the nation’s largest housing agent, said yesterday domestic insurers would definitely inject more capital into the commercial property market, where supplies are scare, after the cap on investment is lifted.
“Prices are sure to go up after demand rises on limited supply,” Lee said by telephone yesterday.
Lee expects insurers to eye grade-A investment destinations mostly in Taipei City’s business districts, such as Xinyi, Dunhua S Rd and Nanjing E Rd, as well as grade-B industrial office buildings in Neihu District.
For example, Shin Kong Life Insurance Co (新光人壽) has long expressed interest in acquiring another office building after acquiring nine different properties in Neihu.
Taichung and Kaohsiung cities may get a slice of the pie, once both are upgraded to municipalities, or if the southern city’s commerce and trade zones successfully attract clusters of businesses, Lee said.
Roy Ku (古健輝), manager of appraisal at Colliers International (Taiwan) Ltd, was also optimistic.
He said that insurers were competing for investments, which generate a better reward than time deposits or government bonds, in a low interest rate environment, and properties provide the best alternative.
As of May, the insurance sector had NT$8.8 trillion (US$266 million) in working capital. In accordance with the new regulation, insurers will be allowed to invest up to 3 percent of that in properties.