Taiwan commercial property prices may rise as much as 15 percent next year after a trade agreement with China is signed, Citigroup Inc said.
“There might be a lot more mainland companies that want to set up branches, offices in Taipei or Taiwan” after the deal, Citigroup analyst Dave Chiou (邱義昇), 32, said in a telephone interview on Friday. “That’s going to boost demand for commercial office space. That will mean rents are probably going to go up.”
China and Taiwan have started talks for an economic cooperation framework agreement (ECFA), that will reduce trade tariffs and encourage cross-border investment.
President Ma Ying-Jeou (馬英九) said on March 16 that he expects the accord to be signed by the end of the first half of the year and that such an agreement is essential for Taiwan as “economic isolation is very hard to cope with.”
Dahan Development Corp (大漢建設), which sells and leases commercial buildings, surged by the 6.9 percent daily limit on Friday to a four-year high. Kedge Construction Co (根基營造), which builds commercial buildings, jumped 5.6 percent on Friday to its highest since July 1998.
There is currently between 11 percent and 12 percent of excess supply for commercial properties, said Chiou, part of a team ranked first for research about Taiwan by Institutional Investor for 2008 and last year.
Industrial & Commercial Bank of China Ltd (中國建設銀行), the world’s most profitable bank, and Bank of China Ltd (中國銀行), the country’s third-largest lender, have said they plan to be among the first Chinese banks to have a presence in Taiwan.
Higher-priced locations such as Taipei 101 may benefit the most, Yeh Lin-chi (葉凌棋), chief executive officer of broker Evertrust Rehouse Co (永慶房屋), said in January. Rentals may rise first, followed by prices of office buildings, he said.
Taipei 101 counts Lenovo Group Ltd (聯想) and Bank of America Corp among its tenants.
The agreement may have a smaller impact on residential properties, said Chiou, who has lived in Taiwan for 10 years.
“Even if [an] ECFA is signed, the Chinese money is probably not going to come in the short term,” he said. “I think it’s going to take time for the mainland to really come into the market.”
Chiou said unfamiliarity with the market, vague regulations such as whether they would be granted a longer stay if they buy a house, financing concerns and possible animosity from locals may deter Chinese from buying property in Taiwan.
Citigroup expects a 5 percent increase in residential property prices in Taipei this year after the ECFA is signed, Chiou said.
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