Commercial property transactions might increase by more than 10 percent this year after sluggish trading last year, thanks to strong demand for office, hotel and retail space, Jones Lang LaSalle Taiwan (JLL, 仲量聯行) said yesterday.
“The commercial property market may see a stable recovery this year, while residential properties may have another tough year,” Jones Lang LaSalle Taiwan managing director Tony Chao (趙正義) told a media briefing.
The commercial property market totaled NT$88.2 billion (US$2.76 billion) last year, shrinking 2.6 percent from 2013 to a four-year low, as the minimum yield requirement of 2.875 percent continued to sideline life insurers, Chao said.
Chao expects the trading volume to expand to NT$100 billion this year after the Financial Supervisory Commission (FSC) indicated plans to ease yield requirements in two months now that commercial property prices have stabilized.
FSC Insurance Bureau Director-General Joanne Tseng (曾玉瓊) confirmed last month that it is time to revisit the requirement two years after its implementation.
“The market has been well-behaved for the past two years,” Tseng said, referring to property prices.
Repeated reports of record-high deals drove the commission to raise the yield requirements steeply in November 2012 to cool the market.
A yield requirement of 2.5 percent is more practical, as property owners have refused to cut prices, therefore stalling transactions for the past two years, Chao said.
Swamped with cash, major life insurers used to be the largest property buyers in the nation, but had to channel property funds abroad last year.
Property investments overseas amounted to NT$39.2 billion last year and will climb higher this year, Chao said.
The current yield requirement of 2.875 percent is not unreasonable, as it ranks the lowest worldwide, Chao said.
Property yields in London hover at about 4 to 5 percent, he said.
Jones Lang LaSalle Taiwan marketing director Joe Lin (林大喬) said five-star hotel operators expressed strong interest in entering Taiwan, attracted by the tourism boom.
Inbound tourists are forecast to have surpassed 9 million last year after hitting 8.96 million for the first 11 months, Lin said, citing government data.
The figures are bound to exceed 10 million this year, Lin said.
Both foreign and domestic companies have moved to new headquarters in recent years to enhance their corporate image and save on operating costs, Lin said.
“The trend will create demand for office space in districts with new office buildings,” Lin said.
Jones Lang LaSalle expects rental rates for Grade-A offices to rise between 2 and 3 percent this year, from the average of NT$2,566 per ping (3.3m2) recorded last quarter.
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