Mon, Jan 16, 2012 - Page 12 News List

Analysts say upswing is least likely in real estate

By Kevin Chen  /  Staff Reporter

If there is one sector that is likely to see persistent downward pressure rather than an upswing after Saturday’s election, analysts suggest it would be the real-estate industry in view of the government’s cooling measures and price cuts from within the sector.

Moreover, recent data indicating that current home prices are still in the unaffordable range for much of the general public suggest that the elevated prices will continue to discourage potential home buyers, analysts said.

The building material and construction sub-index, which reflects the general share performance of property stocks, has dropped 30.11 percent since June 1, when the government adopted a special sales levy of 10 to 15 percent on properties sold between one and two years following purchase, a policy also known as the luxury tax.

This compares with the TAIEX’s 20.75 percent fall over the same period, according to Taiwan Stock Exchange data.

In addition, the property market could remain depressed as a new law that requires the registration of actual real-estate transaction prices is scheduled to take effect in July.

“Construction shares will extend their previous weakness,” Henry Chen (陳志恆), an analyst with Value Partners Concord Asset Management Co (惠理康和投信), said on Saturday.

Moreover, price cuts announced by Highwealth Construction Corp (興富發建設) earlier this month of up to 25 percent for two presale residential housing projects in Taipei City also indicate that the property market would undergo a downward price correction in the near term, Chen said.

Last week, several real-estate builders voiced sharp criticism of Highwealth’s move, saying it was hurting the real-estate industry at a time when it has been hard-hit by the government’s efforts to rein in housing prices.

CRITICISM

On Tuesday, Chao Teng-hsiung (趙藤雄), chairman of the nation’s biggest land developer, Farglory Group (遠雄集團), said Highwealth’s price cut was simply a move to cheat the public and that it was not an act of benevolence.

“Highwealth once announced a plan to raise prices by 15 percent in 2010 and this time it has said it would cut prices by 25 percent, so will it plan to increase prices by 20 percent next year?” Chao said on the sidelines of a signing ceremony with government agencies to build low-cost housing units in Linkou (林口), New Taipei City (新北市).

“This is an irresponsible, deceitful and dishonest act,” Chao said.

Huang Hsiang Construction Co (皇翔建設) chairman Liao Nien-chi (廖年吉) shared Chao’s views and said it was a typical marketing tactic employed by Healthwealth chairman Cheng Chin-tien (鄭欽天) to boost sales.

“Highwealth’s move was only aimed at first driving up prices so they could then cut them down. It does not make any sense,” Liao said.

So far, major builders such as Farglory, Huang Hsiang and Lih Pao Construction Co (麗寶建設) said they had no plans to follow suit, even though analysts said price cuts by other developers would stimulate sales.

“The psychological effect of Highwealth’s move unquestionably dampens an already fragile property market and has the industry crying foul,” Primasia Investment Consultancy Co said on Wednesday in a note.

While Farglory and Huang Hsiang said Highwealth’s residential projects had initially been overpriced, the current average prices are not low enough to stimulate meaningful demand, according to Primasia.

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