Investment returns on residential property in the greater Taipei area have been squeezed by rising home prices, falling to 2 percent from around 4 percent a year ago, analysts said yesterday.
According to Evertrust Rehouse Co (永慶房屋), residential property prices in Taipei City and Taipei County rose about 50 percent on high liquidity between the first quarter of last year and the first quarter of this year.
Hopes that the local economy will benefit from warming ties across the Taiwan Strait were also cited as a driving force behind the higher prices, the agency added.
“However, residential property rents did not change much during the period, as many landlords dared not to raise rents with so many potential tenants still suffering layoffs and pay cuts thanks to the economic meltdown at home and abroad,” said Tu Chin-ku (涂金谷), a manager at Evertrust.
Tu added that the number of buyers taking advantage of the present low interest rates to purchase property in which to set up homes increased, which also dragged down demand in the home rental market.
“As the cost of home purchasing jumped, the investment return fell. In some downtown areas such as Xinyi District [信義] and Daan District [大安], the return rate even fell to as low as around 1 percent,” Tu said.
WAITING LONGER
Due to a rise in the availability of residential property, a landlord in Taipei City needs to spend three months finding a tenant now, compared with 1.8 months a year ago, Tu said.
In Taipei County, meanwhile, the period is up to 3.5 months compared with two months a year ago, he added.
“The low return has made residential property investment less attractive,” Tu said.
Stanley Su (蘇啟榮), a senior researcher with Sinyi Realty Co (信義房屋), agreed, saying that residential rentals in the greater Taipei area have failed to achieve a meaningful recovery for the last four to five years because of a supply glut.
Su said, however, that the 2 percent investment return could already have bottomed out and that further room for decline is limited.
He said he is optimistic about the outlook for the local economy after it emerged from a recession in the fourth quarter of last year following a contraction of 9.06 percent recorded in the first quarter of last year.
SLOW RECOVERY
“But, how long it will take for the return to make a significant comeback remains to be seen, as economic improvement needs time to trickle down to the public,” Su noted.
While some landlords in the area have advocated a 10 percent rise in home rents to offset their purchase costs, Su said he has reservations about that as the central bank continues to keep interest rates low in an attempt to nurture the economic recovery.
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