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Property plunges as banks liquidate

Going once.... * Citibank last month launched an auction in which it put up some 30 homes for sale after owners defaulted on loans. * The auction was regarded as "a huge success," selling 20 units for NT$27 million or 61 percent of what the US bank had hoped to recover. * Other banks have said they will follow suit with similar auctions in order to lessen their bad loan ratios. * Realtors warned that such large-scale dumping could have a "destructive" impact on the real estate market.

Taiwan's property market -- already at a 10-year low -- is set to sink even deeper as more banks scramble to liquidate collateral from mortgage defaults in response to mounting problem loans, analysts said.

Citibank last month launched an unprecedented auction in southern Taiwan, in which the bank put up some 30 homes for sale after owners failed to repay mortgage loans.

Each property was tagged with an asking price some 40 percent below market value.

"We want to liquidate these houses as quickly and efficiently as possible before they lose more value in a market where we don't expect to see a recovery over the next six months to one year," said a Citibank official who declined to be named.

The auction, regarded by local media as "a huge success," sold 20 units for NT$27 million or 61 percent of what the US bank had hoped to recover.

"We will hold more auctions like this to keep capital flowing," she said, adding that the bank has already acquired some 300 houses from court auctions.

Domestic banks such as Fubon Commercial Bank (富邦銀行), Ta Chong Bank (大眾銀行) and Taishin International Bank (台新銀行) have said they may follow suit in an effort to reduce the impact of problem loans.

Taiwan's non-performing loans (NPLs) among domestic banks rose to a record high of NT$929.1 billion (US$26.90 billion) or an average of 6.47 percent at the end of June.

But realtors warned that such large-scale dumping of properties could have a "destructive" impact on the real estate market, which has already lost nearly 50 percent of its value in Taichung and the Kaohisung region from the peak of the property speculation frenzy in 1989.

"Auctions like Citibank's could have a destructive effect on the property prices given the overwhelming quantity of such homes," said Victor Chang (張欣民), senior manager of Sinyi Realty Estate Inc (信義房屋).

Currently, mortgage loan defaults account for roughly 60 percent of total non-performing loans, which he estimated to be equivalent to some 260,000 housing units.

The dumping poses a serious threat to the market which has been contracting at an alarming pace due to oversupply and weak demand.

Last year, the number of property sales fell to 321,165 from 508,748 in 1996, according to the Ministry of Interior.

Chang predicted the total number of houses traded this year would decline further, to around 250,000 to 260,000 units.

About one out of every six homes is now vacant, he added.
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