Thu, Jul 07, 2016 - Page 11 News List

Commercial real-estate market remains sluggish

PROLONGED CORRECTION:Despite being generally slow, sales totaled NT$25.18 billion due to the NT$16.5 billion sale of a mixed-use skyscraper in Kaohsiung

By Crystal Hsu  /  Staff reporter

Commercial property sales totaled NT$25.18 billion (US$776.99 million) last quarter, nearly three times the amount during the same period last year, thanks to a large one-off deal, without which the market remained sluggish, analysts said.

The interest rate cuts help to extend the correction drama as they allow sellers more room to hold onto their properties at lower borrowing costs, while buyers continue to demand greater concessions.

“The market might see three years of modest price corrections and an extra four years of consolidation, as sellers and buyers remain at loggerheads,” international property consultancy DTZ Taiwan’s general manager Billy Yen (顏炳立) said.

Yen said sellers would be more reluctant to show flexibility after the central bank last week cut interest rates by 12.5 basis points for the fourth time in nine months, bringing interest rates for mortgages below 2 percent.

However, real-estate prices remain high following a decade of boom, and drastic property tax hikes and ongoing economic weakness keep expectations of price declines unabated, DTZ said.

The conservative sentiment accounted for the sale in May of a mixed-use skyscraper in Kaohsiung that houses both the Grand Hi-Lai Hotel (漢來飯店) and Hanshin Department Store (漢神百貨), DTZ Taiwan director of real-estate appraisal Charlie Yang (楊長達) said.

Taiwan Life Insurance Co (台灣人壽) bought the building for NT$16.5 billion, the second-largest deal in the nation since 2008, Yang said.

With 42 floors above ground and seven basement floors, the building is the sixth-tallest in Taiwan and third-highest in Kaohsiung. It has 47,644 ping (157,225m2) in floor space sitting on a plot of 2,397 ping.

The deal comes with a 20-year lease from the hotelier and department store, allowing the insurer to gather a rental income of 3 percent a year.

Self-occupancy demand from technology firms underpinned transactions during the April-to-June period if excluding the Kaohsiung deal, which contributed 65.54 percent of overall turnover, DTZ said.

Powertech Technology Inc (力成科技) bought a plant in Hsinchu and Avalue Technology Inc (安勤科技) acquired office space in New Taipei City’s Jhonghe District (中和), DTZ said.

CBRE Taiwan, another international property consultancy, is more upbeat about the market outlook on the grounds that rising global uncertainty would drive people to adjust asset allocation strategies.

“Sellers will more actively adjust their portfolio in the second half of the year, as downside risks build up,” CBRE Taiwan managing director Joseph Lin (林俊銘) said.

As extending the “status quo” appears impractical and ill-advised, some might lower prices by 10 percent to facilitate transactions, Lin said.

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