Tue, Jun 12, 2012 - Page 12 News List

FEATURE: Focus on investment in luxury housing moves south

ROAD TO WEALTH:Efforts by the central bank to dampen a potential property bubble have had limited effect, but supply constraints encourage buyers to look outside Taipei

By Crystal Hsu  /  Staff reporter

“At only a quarter of luxury housing prices in Taipei City, these Taichung properties could sell for more than NT$600,000 [per ping],” Yen said. “The company is confident of making history in Taichung, as it has done in Taipei.”

It is the first auction for luxury housing in central Taiwan, which will help set a benchmark and make housing prices transparent for both buyers and sellers, Yen said. The auction is due to take place on June 27.

Housing prices, especially for upscale apartments, are something of a market mystery and draw close attention from the central bank, after a new building across from Da-an Forest Park in Taipei reportedly sold its penthouse unit for NT$3.04 million per ping.

The central bank has stepped up inspections of luxury home mortgage operations and plans to tighten credit controls to curb their prices after the special levy failed to trigger a correction in the past year.

Central bank Governor Perng Fai-nan (彭淮南) recently voiced concern over worsening affordability, saying he could not even buy one ping of luxury housing in downtown Taipei on his annual salary, estimated at between NT$2.6 million and NT$2.8 million.

Perng is reportedly considering capping mortgages at 50 percent for houses valued over NT$80 million in Taipei City and NT$50 million in other parts of the country when the bank holds its quarterly policy meeting on June 21.

The tightening measure might alarm the market, but would not deter developers or investors with deep pockets, said Chen Hsi-chung (陳錫宗), general manager of H&B Realty Co (住商不動產), the nation’s largest broker by number of franchises.

Rich borrowers would be able to secure funds to meet their investment needs if they wanted, Chen said.

“It is borrowers who command the upper hand in a market with flush liquidity and low interest rates,” he said. “The lenders would not turn away wealthy customers while toeing the [central bank’s] line.”

High-priced homes generate better returns and rising land costs make constructing expensive homes practical and profitable, he added.

The plot of land where Crystal House sits cost NT$528,000 per ping in 1997 and is valued at NT$2.59 million per ping today, said Chang Chung-hung (張忠弘), chairman of Productivity Architect Co (生產力建設), which developed the complex in Taichung’s most expensive location.

The company could rake in a fortune simply by leaving the land idle and trading it for capital gains, Chang said.

“However, we spent four years building the project with the latest technology to make it an artistic work,” he said, adding that he and two other partners reserved a unit each for themselves.

SHORTEST PATH

Developers with adequate capital may be biding their time when the economy turns sour as history shows “patience pays off.”

Construction firms raised prices steeply for their housing inventory after the economic downturn of 2008 and are repeating the strategy as the current slowdown pans out, H&B head researcher Jessica Hsu (徐佳馨) said.

“A shared belief that housing prices will trend up in the long run encourages the practice, which has proven rewarding for the firms,” Hsu said. “That is why real-estate investment is dubbed the shortest path to wealth.”

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