Breaking a five-decade-old ban, the government on Monday will begin accepting applications from Chinese people and business groups seeking to invest in Tai-wanese real estate.
But hopes that an influx of Chinese money might bolster the lagging real-estate market are misplaced, according to industry commentators. The travel restrictions on Chinese nationals to Taiwan and low rental margins will likely keep the money away, they say.
Paving the way for the new regulations, the Cabinet approved amendments to the Statute Governing the Relations between the People of the Taiwan Area and the Mainland Area (
In the regulations published by the Ministry of the Interior, Chinese nationals, enterprises and other Chinese organizations or Chinese-invested companies in a third country are permitted to buy and sell offices, land and residences.
Chinese investors may build hotels, recreational facilities, apartments, residential buildings, plants in industrial parks and even develop new industrial zones, according to the new regulations.
However, applications from Chinese investors to buy property or land will be subject to approval by the Ministry of the Interior.
Also, Chinese investors will be barred from buying land set aside for mining and fisheries, while property in government, civil aviation and military facilities will also be off limits.
Any purchase that could potentially impede major public construction projects or business activity that could be construed as monopolizing the market or as real-estate speculation is also prohibited.
News of the rule changes bolstered the construction subindex of the TAIEX by 5.7 percent yesterday, as investors hoped the move would help buoy the flagging real estate market. Cathay Real Estate Development Co (
But the lifting of the ban on foreign ownership of local real-estate in February, and now the lifting of the ban on Chinese investment, appears unlikely to significantly affect the real estate market.
Victor Chang (
While Chinese investors might be keen to set up offices and warehouses for trade purposes, the local office market doesn't offer the same returns as hot property locations in Chinese cities such as Shanghai or Beijing.
According to CB Richard Ellis, a real estate services company, rental yields -- which are the percentage differences between the capital value of property and annual rental returns -- on office properties in the fourth quarter of last year were 14 percent in Shanghai and 17 percent in Beijing.
Yields in Taipei, however, are only around 5 percent, in large part because of inflated property prices, which have remained high since rampant speculation during the 1980s.
A report by Colliers International suggested that things aren't going to improve anytime soon.
In Taipei, "due to surplus supply, rentals for all office grades are still falling. Under competitive pressure, some building owners have automatically lowered the asking rentals or provided premiums such as extending rent-free periods ... in order to appeal to new tenants," it said.
Colliers expects the gloom to continue until 2004, with a 50,000-ping increase in the supply of office space keeping vacancy rates high and rental prices low.
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