The under-par auction price of a foreclosed apartment at The Palace in Taipei, once the most expensive residential complex in Taiwan, was an isolated incident, not a sign of a crash in the nation’s luxury housing market, analysts said yesterday.
Still, the result suggests a significant correction from the rates paid in 2013 and its does not bode well for the market for upscale apartments, which could remain unpopular despite the improving economy.
Taipei-based Fu Yi Investment Co (富益投資) on Wednesday won the auction for a 131.2 ping (433.36m2) apartment and a 19 ping parking space at the complex for NT$222.22 million (US$7.33 million), or a 5 percent premium over the floor price, Taipei District Court data showed, after two earlier attempts to auction the apartment failed to draw a bidder.
The price translates to NT$1.88 million per ping, a 37 percent drop from the NT$2.98 million per ping recorded in July 2013 on the government’s property transactions Web site.
“The foreclosed price is not available on the regular market and therefore will not become a benchmark,” Taiwan Realty vice chairman Jack Chou (周鶴鳴) said, adding that it is not fair to compare good assets with bad ones that usually entail higher risk.
Foreclosed apartments might require expensive renovation and buyers often have difficulty evicting existing occupants, Chou said.
Property investors, the main players in the foreclosure market, usually put foreclosed apartments back on the market after giving them a facelift to make a profit, Chou said.
Though the court promises a walk-through, uncertainty lingers over whether the winning bidder would be able to take control of the apartment without the existing occupants protesting, Sinyi Realty Inc (信義房屋) research manager Tseng Ching-der (曾敬德) said.
“The uncertainty scared away prospective buyers in the earlier auctions and accounted for the below-par price at the third attempt,” Tseng said.
The below-par price would increase the chance of a profit later, due to the desirability of apartments in popular and convenient locations, Tseng said.
The Palace is on Renai Road close to Taipei’s Daan Forest Park and its mass rapid transit station.
H&B Realty Co (住商不動產) head researcher Jessica Hsu (徐佳馨) voiced concern that luxury housing more than 10 years old could become increasingly unattractive in light of the deal.
While the foreclosed price might not be the norm, it suggests an unmistakable downturn in luxury housing prices, Hsu said, adding that the trend is particularly evident in Taipei due to high holding costs.
A pre-sale luxury apartment in Taipei’s Shihlin District (士林) was sold for NT$2.07 million per ping in November last year, the highest in the neighborhood, according to the latest government data.
It remains to be seen if the record rates can be sustained given the sluggish market, Sinyi Realty said.
The central bank has capped mortgage lending at 60 percent for luxury homes after easing credit controls on land financing and second homes in popular areas.