Commercial property transactions totaled NT$9.1 billion (US$292.9 million) in the second quarter, falling 69 percent from a year earlier and 24 percent from the first quarter, as a new property tax weighed on the market, brokers said yesterday.
“The property market apparently has yet to hit bottom, although the new property tax has settled,” said Gordon Kao (高銘頂), general manager at Savills Taiwan Ltd, the local branch of a British property consultancy.
Kao voiced concern that the local commercial property market could further deteriorate with the impending imposition of new income taxes on property gains starting next year.
The new integrated house and land sales tax requires foreign property investors to pay income taxes of between 35 and 45 percent on gains from property transactions, depending on the length of holding period, much higher than that in Japan, Hong Kong, the UK and Australia, Kao said.
The heavy tax burden could make commercial properties in Taiwan less attractive and the local market could become increasingly marginalized, Kao said, adding that soaring property prices have already squeezed rental yields.
As a result, self-occupancy purchases drove transactions during the April-to-June period, with factory office and buildings accounting for 85 percent of total transactions, Savills Taiwan said.
Advanced Semiconductor Engineering Inc (ASE, 日月光半導體), the world’s largest chip testing and packaging service provider, acquired a new factory from an affiliated developer for NT$2.47 billion (US$79.5 million), making it the largest property deal last quarter.
Domestic life insurers, the major players for commercial properties, stayed on the sidelines, constrained by the minimum yield requirement of 2.875 percent, Savills Taiwan said.
The only exception was China Life Insurance Co’s (中國人壽) purchase of factory space in Taipei’s Nangang District (南港) for NT$460 million, the broker said.
China Life’s peers, such as Shin Kong Life Insurance Co (新光人壽) and Nan Shan Life Insurance Co (南山人壽), opted to buy undeveloped plots of land that are to be turned into office space.
Buying interest for office space remained low last quarter, as companies chose to lease rather than own, given high prices and risks that they could take a downturn going forward, said CB Richard Ellis Ltd (CBRE) Taiwan, the local office of a US property consultancy.
Commercial property transactions could retreat below the NT$60 billion level this year, the lowest since the global financial crisis in 2008, CBRE Taiwan managing director Joseph Lin (林俊銘) said.
On the other hand, property fund outflows might accelerate in the second half after hitting NT$42.7 billion in the first half, Lin said.
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