Transactions of commercial property in Taiwan fell to a seven-year low last year at a time when the local economy was slowing down, according to a recent research report.
Citing the report, international property consultancy DTZ Debenham Tie Leung (戴德梁行) said that transactions of office and shop space in Taiwan totaled NT$77.86 billion (US$2.32 billion) for the whole of last year, down 14 percent from the previous year.
Last year’s transaction value even fell to the lowest level since 2008 due to poor performance in the local economy, DTZ said.
Taiwan’s economy grew only 0.85 percent last year, the slowest growth in six years, compared with a 3.92 percent increase seen in 2014, according to government statistics released on Jan. 29.
In addition to the weaker economic fundamentals, DTZ said political uncertainty ahead of the presidential and legislative elections on Jan. 16 further dampened sentiment in the local commercial property market last year, while a tax reform to collect capital gains in property transactions also drove many investors to the sidelines.
FOURTH QUARTER
Transactions picked up significantly in the fourth quarter of last year, spiking to NT$48.92 billion, accounting for more than half of the total last year, but the increase failed to help the local commercial property sector climb out of the doldrums for the whole year, DTZ said.
The soaring transactions in the fourth quarter were largely due to investors wanting to avoid being taxed under the reformed tax law, which took effect from Jan. 1 this year.
The law aims to curb property market speculation by imposing a capital gains tax of up to 45 percent on people who sell their commercial or residential property within a certain period of time from the date of purchase.
LIFE INSURERS
DTZ said that the increase in transactions in the fourth quarter also resulted from a move by the government to lower the investment return requirement imposed on local life insurance companies for their property investments to 2.555 percent from the previous 2.805 percent.
The cut in the return requirement, starting from November last year, has prompted several major life insurers to jump into the local commercial property market and buy, which boosted the transactions in the fourth quarter.
On the back of a decline in commercial property supply in the fourth quarter, rents in grade-A offices, in particular in Taipei showed signs of increasing, DTZ said.
The average office rental price in Taipei during the October-to-December period hit NT$2,510 per ping (3.3m2) a month, up 0.4 percent quarter-on-quarter and 2.2 percent year-on-year to mark the highest quarterly level in three years, the report showed.
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