Commercial property transactions might increase 5 to 10 percent this year as sellers are willing to show greater pricing flexibility to facilitate deals, though cautious sentiment could linger due to a potential power transition in May, Jones Lang LaSalle Taiwan (仲量聯行) said yesterday.
“We are cautiously optimistic about the investment market this year, with life insurers possibly playing a more active role in light of loose yield requirements,” Jones Lang LaSalle Taiwan managing director Tony Chao (趙正義) told a media briefing.
The Financial Supervisory Commission in November lowered minimum-yield requirements by 25 basis points to 2.555 percent, allowing a landmark commercial building in Taipei’s Xinyi District (信義) to change hands from Shin Kong Life Insurance Co (新光人壽) to Fubon Life Insurance Co (富邦人壽) for NT$27 billion (US$805.25 million).
As a result, commercial property transactions soared to NT$68.2 billion last quarter alone, more than double the NT$31.1 billion of the first three quarters, Chao said.
The NT$1 billion cut in price helped motivate the buyer, said Chao, whose company brokered the deal.
Likewise, sellers are willing to lower their profit expectations by 10 to 15 percent this year to attract buyers, he said.
The concessions are not enough to end the tug-of-war, though, as rental yields in central Taipei average only 2.2 to 2.3 percent, suggesting a need for further price adjustments, Chao said.
“It remains to be seen whether the yield requirement is necessary and desirable to guide investments,” Chao said.
This year is likely to see an extended soft patch, during which investors would have difficulty finding proper channels to digest excessive liquidity, he said.
Volatility in financial markets around the world and the easy monetary environment in Taiwan would increase the appeal of owning real estate in prime locations here, Chao said.
On the same day it sold the building in Taipei, Shin Kong Life bought an office building in London to pursue higher returns of 4 percent.
Domestic insurers spent NT$58.2 billion on overseas properties last year, an 80 percent increase from a year earlier, Jones Lang LaSalle said.
The amount pales in comparison with the NT$3.7 trillion earmarked by the nation’s top 10 insurers for real-estate investments, Chao said.
Investors would take a wait-and-see attitude in the short term until the power transition settles, he said.
“It would be better if policymakers were open and liberal, making Taiwan attractive and friendly for foreign capital,” Chao added.
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