Recent data indicating steady growth in both housing transaction volumes and prices in the first quarter suggest that the government’s tax reform initiatives and credit tightening measures have stopped weighing down the nation’s housing market, UBS Securities Pte Ltd said in a report on Friday.
The report, released by UBS Securities analyst Ally Chen (陳玟瑾), said the brokerage is no longer bearish about the real-estate market and forecast that transaction volumes would post moderate growth this year as prices remain flat.
“We took a bearish view before mainly because of risks related to government policies,” Chen said in the report, adding that the outlook had improved because “a capital gains tax on property transactions is unlikely in 2013 and 2014.”
The UBS report came as the latest government data showed that property transfers in the five special municipalities rose 24.3 percent year-on-year to 50,998 in the first quarter of the year.
A regional breakdown of the date showed that first-quarter transactions in Taipei increased by 19.3 percent year-on-year to 9,201; by 33.7 percent to 16,267 in New Taipei City (新北市); by 18.3 percent to 10,811 in Greater Taichung; by 16.4 percent to 5,266 in Greater Tainan and by 26.1 percent to 9,453 in Greater Kaohsiung.
Analysts have said that the increase in housing transactions — measured by the registration of building ownership transfers — indicated that the market had shrugged off pressure from unfavorable government policies enacted over the past two years, such as a special sales levy on property transactions and the housing price registration measure.
The stable increase in housing prices in major metropolitan areas is also supporting the market’s upbeat mood, they added.
A report in the Chinese-language Housing Monthly magazine last week said that average home prices in Taipei rose 2.1 percent year-on-year to a historic high of NT$807,000 (US$27,290) per ping (3.3m2) in the first quarter, with prices in New Taipei City rising by 2.6 percent to a record-high of NT$384,000 per ping.
On the local bourse, the building material and construction sub-index — which reflects the general performance of property stocks — has risen 10.75 percent since the beginning of the year, outperforming the TAIEX’s 4.19 percent gain over the same period, Taiwan Stock Exchange data showed.
Among the property stocks, UBS said it favored Huaku Development Co (華固建設) because it expected strong buying interest in the company’s residential projects in Taipei and for it to make an aggressive push to acquire land this year.
“Our ground checks indicate strong buying interest [in its new projects] thanks to Huaku’s quality branding and a change of product type to mid-sized units, rather than focusing only on large luxury units,” Chen said in the report.
HSBC Securities Taiwan Corp analyst Abel Lee (李忠翰) agreed, saying that the short supply of raw land and difficulties in executing urban renewal projects would be key drivers of property prices in Taipei, which would in turn benefit Huaku.
“Strong sell-through in the Taipei projects would provide Huaku with a steady flow of cash and raise average selling prices, which would enable it to engage in aggressive land acquisition,” Lee said in a note on Wednesday.
Huaku shares gained 0.87 percent on the local bourse on Friday to end the day at NT$81.20.
UBS upgraded its rating on Huaku stock to “buy” from “sell” and raised its target price to NT$99 from NT$59, while HSBC retained an “overweight” rating on Huaku shares and raised its target price to NT$95 from NT$87.
Meanwhile, Credit Lyonnais Securities Asia (CLSA) on Friday said Hung Sheng Construction Co (宏盛建設), which launched the landmark residential complex The Palace ( 帝寶 ) in central Taipei in 2004, would benefit from the property boom in New Taipei City’s Tamsui District (淡水) this year.
CLSA gave a “buy” rating on Hung Sheng shares with a target price of NT$34.20 because the government is planning several development projects in the Tamsui area and the company has several projects there. The government projects include an MRT line, an expressway along the Tamsui River and a bridge linking Tamsui to Bali District (八里).
Hung Sheng shares ended 5.95 percent higher at NT$24.05 on Friday.