Shin Kong Life Insurance Co (新光人壽) yesterday called off an office building auction in Taipei’s Neihu (內湖) District over concerns that sluggish economic sentiment and new commercial property investment restrictions would freeze market interest.
“We will discuss follow-up matters [about the project] with the property owner later,” DTZ (戴德梁行), a real-estate consulting firm commissioned to take charge of the auction, said in a press release yesterday.
Shin Kong had previously announced that it planned to conduct the auction on Nov. 14, with the starting price set tentatively at NT$4.59 billion (US$157.62 million).
DTZ last month said that both the location and size of the office building would make the success or failure of the auction indicative of the commercial property market for the second half of the year.
However, the life insurer decided to postpone the sale after the Financial Supervisory Commission (FSC) announced policy changes for life insurers that own property, raising the minimum rental yield to 2.875 percent from 2.125 percent.
The increase in minimum rental yield would suggest a discount of about 30 percent of the current rental level for the office building market, DTZ said.
Several property auctions have been canceled after the commission adjusted upward the minimum rental yield, on concerns the move would freeze the market in the foreseeable future.
Preceding Shin Kong Life Insurance’s cancelation, integrated circuit designer Ali Corp (揚智科技), Cathay United Bank (國泰世華銀行) and Shin Kong Co Ltd (台灣新光實業) all put a stop to planned auctions of commercial property in Taipei.
Despite local life insurers possessing abundant funds with which to buy commercial property, the government’s intervention on rental yields policy may rein them in over the near future, DTZ said.
The real-estate consulting firm added that it expected that most of this year’s remaining commercial property auctions — including three to four commissioned by DTZ — may also be canceled, given the current sluggish sentiment in the market.