The commercial property market might recover modestly this year from a sharp decline last year as investors gain confidence to increase stakes amid an improving economy at home and abroad, international real-estate consultancies said yesterday.
“Investors sidelined by Brexit and the US presidential election might feel more comfortable taking action this year, as the market has been pretty stable thus far,” Jones Lang LaSalle Inc managing director Tony Chao (趙正義) told a media briefing in Taipei.
Excessive savings, defined by the consultancy as the amount of savings minus loans, totaled NT$9.6 trillion (US$297.58 billion) and part of those funds could be guided to real-estate investments to generate better returns, Chao said.
LIFE INSURERS
The central bank made a similar plea last month, saying that domestic life insurance companies have NT$19 trillion in idle funds and five major pension funds hold an additional NT$3.9 trillion that the government could help channel into public works.
Life insurers, which accounted of 37 percent of commercial property transactions last year, are actively looking for investment targets that can generate returns of 3 percent, Chao said, adding that soaring property prices and a lack of supply make that a difficult goal to achieve.
SLOWING TRANSACTIONS
Commercial property transactions last year totaled NT$60.1 billion, a decline of 40 percent from 2015, the Jones Lang LaSalle data showed.
A survey by DTZ Cushman & Wakefield (戴德梁行), another international property services provider, showed a 19.38 percent decline to NT$62.8 billion.
While the lack of pricing flexibility on the part of sellers has slowed deals, a drastic increase in holding costs has scared investors away, Chao said, adding that it remains to be seen if the Taipei City Government’s plans to lower house taxes on luxury homes will reverse the situation.
The city government imposes extra taxes on properties built with expensive materials and in good locations, despite their main purpose being to deter speculation.
DTZ Taiwan general manager Billy Yen (顏炳立) painted a grim picture, saying the property market has yet to hit the bottom and might need four years to swing back to a recovery.
“It is premature to speculate on a recovery, given a persistent decline in trading volume,” Yen told a news conference.
SOFT LANDING
Housing transactions are forecast to have fallen to less than 250,000 units last year, and the actual figures could be lower if inheritance and foreclosure cases are excluded, he said, adding that policymakers have voiced their desire for the property market to have a soft landing, meaning corrections would continue this year and beyond.
Unless the government can tolerate long-term investors and ease holding costs, transactions might not return to a healthy level of 300,000 units or more per year, Yen said.
Land deals last year totaled NT$89.1 billion, less than during the global financial crisis in 2008, as firms avoided inventory building, DTZ said, adding that factories and industrial land plots underpinned transactions to meet capacity needs.
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