Property sector to grow in second half: experts

By Kevin Chen  /  Staff reporter

Tue, Aug 20, 2013 - Page 13

Despite short-term concerns over the tapering of US quantitative easing (QE) and possible luxury-tax reform in Taiwan, the domestic property market would still gain support from the healthy dynamics of supply and demand, analysts said.

That means the real-estate sector could continue to grow in the second half of this year in terms of transaction volume and prices, albeit at a slower pace, they said.

The building material and construction stock sub-index — which reflects the general performance of the property sector — has risen 17.28 percent since the beginning of the year, outperforming the TAIEX’s 2.61 percent advance over the same period, Taiwan Stock Exchange data showed.

Moreover, major developers have seen their shares surge so far this year, with Kindom Construction Corp (冠德建設) rising 111.08 percent, Cathay Real Estate Development Co (國泰建設) up 79.72 percent, Hung Sheng Construction (宏盛建設) up 63.28 percent and Huaku Development Co (華固建設) up 32.34 percent, stock exchange data showed.

On the back of a well-controlled supply of pre-sale residential houses and stable demand amid a low interest-rate environment, property transfers in the five special municipalities rose between 6 percent and 18 percent year-on-year in the first seven months of the year, according to the latest government data.

Concern has been raised over a potential revision to the luxury tax on property transactions.

“The government’s review of the luxury tax poses a major policy risk facing the property market in the second half,” First Capital Management Inc (第一金投顧) said in a note yesterday.

However, the Financial Supervisory Commission’s relaxation of regulations governing insurance companies’ investments in the property market should lend support to the market, First Capital said.

HSBC Securities Taiwan Corp analyst Abel Lee (李忠翰) said in a report yesterday that the sector’s solid fundamentals should largely offset market concerns over the government’s planned revisions to the special sales levy.

“The trend of changing demographics will be a key factor going forward,” Lee said.

In addition, “slower economic growth and reduced inflationary pressure will let the government off the hook from further policy tightening,” he wrote.

HSBC predicted that property prices would increase 5 percent on average in the July-to-December period from the same period last year, after rising 7 percent in the first six months.

CLSA Asia-Pacific Markets also held a positive view toward the market, saying the sell-through of property would accelerate from next month on better seasonality and more aggressive marketing by major developers.

“However, it won’t be as strong as in the first half of this year, due to ongoing concerns about tapering and luxury tax reforms,” CLSA said in a client note on Wednesday last week.