Fri, May 23, 2014 - Page 14 News List

Property market safe amid US Fed changes: analysts

By Kevin Chen  /  Staff reporter

Barclays Capital Securities Taiwan Ltd yesterday said that the nation’s property market is likely to see more headwinds from what analysts called hawkish government regulations during an election year than from potential weakening liquidity due to US Federal Reserve policy changes.

Taiwan is not as sensitive as Hong Kong and Singapore to Fed rate hikes because of the nation’s independent monetary policy, as opposed to its Asian neighbors’ pegs to the US dollar or foreign interest rates, Barclays analysts Sidney Yeh (葉昌明) and Grace Li said in a research note.

“Taiwan’s property market has not been driven by the credit boom since 2009. Also, the nation has generally not attracted international property investors, so we believe any unfavorable capital outflow would have little impact,” Yeh and Li said.

Despite its low-interest rate environment, harsher views or stronger talk by politicians — as the seven-in-one elections approach — could have negative effects on the nation’s property market, through prices and transaction volume, they said.

On Monday, the Legislative Yuan passed a tax hike on homes not occupied by owners. Under the revised rules, the rate for such residences is to rise to between 1.5 and 3.6 percent. The new rate is to displace the current levy of between 1.2 and 2 percent in July.

The building material and construction stock sub-index — which reflects the general performance of the property sector — has underperformed the TAIEX by about 10 percent since the beginning of the year, according to Taiwan Stock Exchange data.

However, Barclays analysts said they do not expect to see what they called radical policies from the government, because that could hurt the banking system as well as domestic consumption, the note said.

“We expect transaction volumes to remain light in the next two quarters. However, disciplined supply could serve to support property prices in Taipei,” Yeh and Li said.

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