Taiwan property market falters amid downturn

CASH-STRAPPED: Several housing projects are about to be completed, but real estate owners are likely to find it difficult to sell or rent their properties, analysts say

By Crystal Hsu  /  STAFF REPORTER

Fri, Dec 26, 2008 - Page 12

Taiwan’s property market flashed its first blue light in seven years in the third quarter on sluggish transactions and plunging construction stock prices, with analysts warning there would be tougher times ahead, a government report showed yesterday.

The report, conducted by the Architecture and Building Research Institute under the Ministry of Interior, said the local property market climate index stood at 7 points in the third quarter, down 3 points from a quarter earlier, reflecting a sluggish market.

Mao Lo (毛犖), an institute official, said the score was extremely low and expressed hopes that interest rate cuts and other stimulus measures could help curb the downturn in the near future.

Assorted commercial banks with government stakes are offering new clients mortgage rates of less than 2 percent for the first six months, starting next year, after the central bank slashed key rates by 1.625 percentage points this year.

The leading property market index, a gauge based on the nation’s GDP and construction stock values, dipped 2.59 points to 95.95 points in the third quarter, the report showed.

The coincident index, which derives its score from land deals, construction permits and areas, as well as occupancy rates, shed 1.87 points to 100.88 points in the same period, the report said.

Chang Chin-oh (張金鶚), a professor of land economics at National Chengchi University, voiced skepticism that stimulus measures would effectively invigorate the property market as long as property prices remained untenable.

“The downward figures show the property market will remain sluggish next year or longer, with sellers and buyers locked in a tug of war over property prices,” Chang said.

He warned investors to stay away from the market, which would go through a sustained period of price adjustment.

The economist said that many pre-sale housing projects were about to be completed but it would be difficult for investors to find buyers or tenants amid the downturn.

“Those with liquidity problems will be forced to sell their properties while prospective buyers will stay on the sidelines on the expectation of lower prices, aggravating downward risks,” Chang said.

The academic said it was unrealistic for the government to expect a recovery through stimulus measures.

“It would be much more effective to lower property prices than lower interest rates to achieve the end,” Chang said. “The government should also factor in the opinions of the buyers when seeking to boost the property market.”

Chang said he and other scholars would put forth their views in a recommendation paper next week.

The property market last flashed the blue light in the final quarter of 2001 with the index also standing at 7. The barometer sank to 6 in the third quarter of 2001 and started to recover in 2002.