Land transactions in last quarter hit record US$2.84bn

LIVING MALL::CPDC could make NT$10 billion if it manages to sell or lease all four luxury buildings that it plans to build on the site of the mall, a broker said

By Crystal Hsu  /  Staff reporter

Thu, Oct 03, 2019 - Page 12

Land transactions last quarter rose to a record-high of NT$88.1 billion (US$2.84 billion), led by the sale of the Living Mall (京華城) in Taipei, which is to be torn down to make way for upscale office buildings, international property consultancy Cushman & Wakefield said yesterday.

The unprecedented deal in terms of value affirmed strong demand for Grade-A offices in central locations, but fell short of foretelling a full-blown recovery for the property market, Cushman & Wakefield Taiwan general manager Billy Yen (顏炳立) said.

The broker deemed the acquisition by China Petrochemical Development Corp (CPDC, 中石化) of the unprofitable mall in Taipei’s Songshan District (松山) for NT$37.2 billion as a land deal since it would tear down the complex after regulators give the go-ahead.

For the first three quarters of this year, major land sales totaled NT$231.8 billion, also a new high and outpacing the figure for the whole of last year, as developers build land stock, aided by limited supply in popular locations and cheap borrowing costs, Yen said.

Developers underpinned 70 percent of the deals, with plans to construct residential or commercial properties, despite local media reports that returning Taiwanese companies are fueling demand for factories, Yen said.

Rather, the land fever has more to do with government agencies releasing land plots or their superfices rights and banks lending support with low interest rates, Yen said.

On average, land values soar 30 to 50 percent every five or six years, making such investments highly profitable and flexible if owners opt to develop buildings and cash out with more property gains later, he said.

For CPDC, it could make a profit of more than NT$10 billion if it manages to sell or lease all four luxury office buildings to be built on the site of the mall, which is scheduled to close next month, Yen said.

That is not a difficult task, as domestic life insurers are potential buyers as they are flush with cash and given low vacancy rates for Grade-A offices in the city’s central business districts, he said.

New office buildings in Xinyi District (信義) are almost fully occupied, with monthly rents of NT$4,000 per ping, thanks to strong demand from technology firms, e-commerce operators and financial institutes, surveys have shown.

Interest rates for land financing stood at 1.8 percent and averaged at 1.7 percent for mortgage operations in the first half of this year, the Joint Credit Information Center (聯徵中心) said.

Borrowing costs among state-run banks dropped to 1.6 percent, as lenders seek to digest idle cash, the legislature’s Finance Committee said yesterday.

This story has been modified since it was first published to correct a mistake in the headline. Land transactions hit record US$2.84 billion last quarter, not in the first quarter as previously stated.