The supply and demand dynamics of Taiwan’s property market remains healthy this year, with residential property prices likely to rise between 5 percent and 10 percent from last year, HSBC Securities Taiwan Corp said in a report yesterday.
That means the sector will continue to thrive this year, with higher transaction volumes and property prices contributing to growth in earnings for major developers through next year, the brokerage said in a report.
Analysts have said the local market has shrugged off pressure from unfavorable government policies enacted over the past two years, such as a special sales levy on property transactions and the housing real-price registration measure, which pushed the number of residential housing transactions to a 10-year low last year.
The latest government data show that property transfers in the five special municipalities rose 24.3 percent year-on-year to 50,998 in the first quarter of the year.
Average home prices in Taipei rose 2.1 percent year-on-year to a historic high of NT$807,000 (US$26,917) per ping (3.3m2) in the first quarter, while those in New Taipei City (新北市) climbed 2.6 percent to a record high of NT$384,000 per ping.
However, some analysts have expressed concerns that property prices may come under pressure in the near term, especially as investors begin to sell houses purchased two years ago, which are no longer subject to a 10 percent to 15 percent sales tax on second homes sold within two years of purchase.
The HSBC report, released by Taipei-based analyst Abel Lee (李忠翰), said transactions have been improving so far this year and the recovery is likely to extend throughout this year.
“Growth expectations and a stable policy backdrop are set to fuel a further sector rerating this year and next year, to levels similar to 2010,” Lee said.
Lee based his optimism on several factors, such as a well-controlled supply of pre-sale residential houses, transparency in transaction price information and stable demand from potential homebuyers thanks to a low interest-rate environment.
However, “there is also concern among potential buyers that their purchasing power is being eroded,” he said.
On the local bourse, the building material and construction sub-index — which reflects the general performance of property stocks — has risen 16.18 percent since the beginning of the year, outperforming the TAIEX’s 7.21 percent gain over the same period, Taiwan Stock Exchange data showed.
Among property stocks, HSBC said it favored Cathay Real Estate Development Co (國泰建設) and Kindom Construction Corp (冠德建設) because of their strong earnings growth and their exposure to the commercial property sector, as well as Huaku Development Co (華固建設) and Taiwan Fertilizer Corp (台肥).