Taiwan’s home prices fell for a seventh month last month, as declining stock prices reduced funds available for potential buyers, a real estate broker said.
Average prices dropped 0.96 percent from September, Sinyi Realty Co (信義房屋), the only real estate broker listed on the Taiwan Stock Exchange, said in an e-mailed statement. Prices have fallen each month since March, when they increased an average 6.5 percent, Stanley Su (蘇啟榮), a senior researcher at the brokers said yesterday.
The benchmark TAIEX index has fallen 46 percent since reaching its high this year on May 20, on concerns about the global financial crisis.
“The losses in the financial markets are affecting potential property buyers, who may have planned to sell financial assets to raise cash,” Su said in a telephone interview.
“Home prices have been weakening month by month since March,” he said.
A “sudden surge” in prices in March deterred potential buyers who were shopping for houses for their own use, Su said.
Home prices rose that month because of expectations improving ties with China would boost demand for properties, he said, noting that prices have fallen back to the levels of the second half last year.
Regarding share prices of property-related firms in Taiwan, Citigroup said these stocks have already corrected more than 70 percent over the past six months, reflecting weakness in the physical property market, Andre Chang (張致竑), an analyst at Citi Investment Research, said in a client note on Friday.
The building material and construction subindex, which reflects the general share performance in the real estate sector, declined 53.4 percent so far this year, Taiwan Stock Exchange tallies showed.
Chang said that over the next 12 months property prices in Taiwan should drop by at least 20 percent to 25 percent from their peak in the first quarter of this year.
The prices “may even overshoot on the downside, as a downward spiral has started,” he wrote in the note. Investors should therefore not expect property-related stocks to show a meaningful rally anytime soon, he said.
However, Chang said stronger property developers without default risks had good chances of seeing a rebound. In addition, he favors companies that have a solid core business base, because these firms “should again see upside from land value once sentiment returns and the market values improve again,” the note said.
Citigroup reiterated a “buy” recommendation on Taiwan Fertilizer Co (台肥), the nation’s largest fertilizer producer and ower of many parcels of land in this country. It upgraded its rating on the stock of Cathay Real Estate Development Co (國泰建設) to “buy” from “hold.”
Shares of Taiwan Fertilizer rose 5.75 percent to NT$46 yesterday, while Cathay Real Estate dropped 3.87 percent to NT$7.2.
In Taipei trading yesterday, Farglory Land Development Co (遠雄建設) and Huaku Development Co (華固建設) rose limit-up to NT$23.75 and NT$35.40 respectively on speculation that the government would allow funds from China to invest in local commercial buildings, dealers said.
But SinoPac Securities Corp (永豐金證券) said in an investment note released yesterday: “We remain neutral on the sector as we believe the housing sector will see a deep correction after the bull run of recent years.”
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