Commercial property transactions remained soft last quarter, but land deals gained traction as builders and developers started to build inventory in anticipation of a gradual and slow recovery, analysts said.
Builders and developers accounted for 60 percent of the NT$18.9 billion (US$617.63 million) of land deals in the first quarter, up 50 percent from the same period the previous year.
That shows the market is soon to emerge from protracted corrections, Colliers International Taiwan managing director Andrew Liu (劉學龍) said.
“The attitude of builders and developers serves as a market barometer and their willingness to increase their stock of land suggests a turnaround is around the corner,” Liu said last week.
Major deals included Ruentex Development Co (潤泰創新) purchasing land in Taipei’s Nangang District (南港) for NT$3.5 billion, Farglory Land Development Co’s (遠雄建設) NT$2.15 billion purchase in Taipei’s Neihu District (內湖) and in Taichung, and Highwealth Construction Corp’s (興富發) NT$1 billion purchase in Kaohsiung.
Both Cushman & Wakefield Co and Jones Lang LaSalle Inc have at a similar outlook.
Cushman & Wakefield real-estate appraisal director Charlie Yang (楊長達) said on Thursday that land purchases could recover to the 10-year average of NT$$110 billion this year, thanks to low interest rates and ample liquidity.
Cathay Life Insurance Co (國泰人壽), the nation’s largest life insurer, last month bought a plot of land in downtown Taipei for NT$2.33 billion to help digest idle funds.
The nation’s top 10 insurance companies accumulated more than NT$4.5 trillion of investment funds last year, an increase of 15.4 percent from the previous year, while deposits outpaced loans by NT$10 trillion to NT$36 trillion, Jones Lang LaSalle said.
Life insurers have refrained from real-estate investments, bounded by the minimum yield requirement of 2.345 percent set by the regulator while return rates stand at 2.5 percent for commercial properties in popular locations of Taipei, Jones Lang LaSalle Taiwan managing director Tony Chao (趙正義) said on Thursday.
Net returns would drop to 2 percent after factoring in property and land taxes, Chao said.
Colliers International Taiwan said that holding costs are unreasonably high, as they eat into 25 percent of rental incomes and are four times higher than in Hong Kong.
High property and land taxes have made commercial properties an unintended victim of the government’s effort to curb price increases, Liu said, calling for selective tax cuts for commercial properties.
Commercial property transactions totaled NT$8.35 billion last quarter, down 6.7 percent from a year earlier, according to Jones Lang LaSalle tallies.
Cushman & Wakefield Taiwan general manager Billy Yen (顏炳立) said the property market, whether commercial or residential, might not recover unless sellers lower prices.
A few builders have come to the realization and set reasonable prices for pre-sale projects, Yen said, adding that the move would highlight that prices for existing properties are unreasonably high.
The rebound in housing transactions in the first quarter would slow the pace of price corrections rather than usher in a sustained recovery, Yen said.
The housing market is expected to remain weak until transactions recover to 300,000 units a year, Yen said.
The number is likely to be between 250,000 and 260,000 units this year based on the performance in the first quarter, compared with 245,000 units last year, he said.
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