The pre-sale and new home market flashed a second “blue” signal last month, reflecting sluggish sales, which have improved slightly after some developers lowered prices significantly to facilitate transactions, a Housing Monthly (住展雜誌) report said.
The improvement could sustain its momentum if builders resist the temptation to increase price tags amid a nascent recovery in buying interest, the Chinese-language magazine said.
The market indicator stood at 31.7 last month, modestly better than 31.1 in May and approaching the threshold of 32 for a “yellow-blue” indicator, as pre-sale projects soared to NT$40 billion (US$1.24 billion), from more than NT$10 billion one month earlier, the report said.
“The sentiment gauge could flash ‘yellow-blue’ this month, if the numbers of prospective buyers and dealers pick up further, suggesting the market is shifting gears away from a recessionary state,” the publication’s research manager Ho Shih-chang (何世昌) said.
A pre-sale project is to feature small apartments that are priced below NT$400,000 per ping (3.3m2) even though they are within seven minutes’ walk of Jiangzicui Mass Rapid Transit Station in New Taipei City, the report said.
Likewise, a pre-sale project in Wugu District (五股) has price tags of below NT$300,000 per ping.
The asking prices of both projects are similar to market rates for existing homes nearby, successfully attracting prospective buyers to visit their construction sites, the report said.
As a result, the sub-index on potential buyers rose from 5.76 to 6.15 last month while the reading on transactions climbed from 4.69 to 5.16, the report showed.
However, the sub-index on sales of newly completed houses dropped to 3.88, from 5.27 in May, as developers shun selling such products because they are subject to higher holding taxes.
The Taipei City Government has drastically increased house taxes on homes built with expensive materials and in convenient locations, nearly freezing housing transactions in recent years.
Projects with rigid prices remained unpopular as evidenced by their quiet reception, especially in Taipei, Ho said, adding that high land acquisition costs and a lack of cash strain account for their inflexibility.
The sub-index on price concessions and advertisements stayed unchanged at 4.78 and 4.48 last month, extending the preference on the part of builders and developers for the “status quo,” despite another interest rate cut in June by the central bank to stimulate investment interest.
Construction companies play an important part in driving private investment, a key component of GDP growth in Taiwan, but they made negative contributions in previous quarters and might continue to do so for the rest of this year.
Several companies have said they would hold off introducing new residential projects this year, but would focus on digesting earlier inventory.
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