Housing prices to drop, except in Taipei: analysts

DOWNWARD TREND::Prices could fall more than 10 percent this year, slumping further over the next three to five years, with a rise in interest rates, academics said

By Kevin Chen  /  Staff reporter

Tue, Jan 14, 2014 - Page 13

Government officials and academics have warned that housing prices could be weaker this year compared with last year.

Barclays Capital analysts, however, believe prices can still hold up — at least in Taipei.

The Chinese-language Economic Daily News reported last week that the Ministry of Finance was considering to levy a higher capital gains tax on luxury housing by changing the way it assesses gains.

The newspaper said the ministry intends to impose heavier taxes on houses sold for more than NT$80 million (US$2.6 million) in Taipei and more than NT$50 million in the rest of the country.

Minister of Finance Chang Sheng-ford (張盛和) dismissed the report, saying any such talk was premature.

Over the weekend, Hua Ching-chun (花敬群), an associate professor of real-estate management and investment at Takming University of Science and Technology, together with Chuang Meng-han (莊孟翰), a professor of industrial economics at Tamkang University, said that they expected high housing prices to finally give way this year, citing signs of a potential rise in interest rates later this year and the recent decline in housing transactions.

Hua predicted that housing prices could drop by more than 10 percent this year and continue the downward trend for the next three to five years, CNA reported.

Barclays Capital Securities Taiwan Corp, however, issued a report yesterday which said that Taipei property prices could still hold up for several reasons — tight supply being a major factor.

“In the near-term, while demand is weak, we expect tight supply to again help to support property prices in Taipei,” Barclays analysts Sidney Yeh (葉昌明) and Grace Li said in the report.

The two analysts said a tight land supply would continue to cap new property project launches in Taipei, the only city with a supply shortage and where housing upgrade demand remains strong.

They added that “Taiwanese developers are unlikely to lower their selling prices for new projects as they are cash rich or have low debt levels.”

As for Hua’s prediction that the central bank would likely raise its policy interest rates beginning in the second half this year, given the US Federal Reserve’s plans to scale back its massive bond-buying program this month, Barclays analysts said Taiwan’s mortgage rates could remain at the current low levels for the next two years.

“Concerns of a rapid reversal in interest rates seem premature,” Yeh and Li said in the report.

However, negative reports in the past few weeks have clouded the property market outlook and caused property stock prices to fall during this period.

The building material and construction stock subindex — which reflects the general performance of the property sector — has declined 15.66 percent in the past one month, underperforming the TAIEX’s 2.26 percent advance during the same period, according to Taiwan Stock Exchange data.

SinoPac Securities Investment Service (永豐投顧) real-estate researcher David Lee (李曜宇) said he would hold a neutral view for the property sector this year.

“The heavier tax scheme is likely to curb luxury housing transaction,” Lee said.

“There are other headwinds for the sector too, such as the higher land value increases and taxes this year, and the policy uncertainties ahead of the seven-in-one elections at the end of the year,” Lee added.

The seven-in-one municipal elections refer to polls for all directly elected local government positions, including special municipality mayors and councilors; county commissioners; city mayors; county and city councilors; township mayors and councilors; and borough and village wardens.

Additional reporting by CNA