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Taiwan Real Estate Report Q1 2012
Business Monitor International, Nov 2011, Pages: 39
Taiwan’s commercial real estate market is expected to continue its growth into 2012, supported by a generally favourable economy and low interest rates. However, this could be dampened by any unexpected rises in interest rates and restrictions of financial lending policy by the Central Bank. These fears were allayed somewhat in September 2011 when Taiwan’s central bank decided not to raise interest following five straight quarters of rate hikes. Attention will now be focused on the health of the global economy. If the eurozone debt crisis were to spur another major financial crisis, falling demand from the US and Europe, as well as China and Japan, would hurt Taiwan’s largely export-oriented economy.
Economic data indicate the beginning of a slowdown of Taiwan's economy. Not only did Q211 GDP growth come in at 4.9% (down from 6.4% in Q111), industrial output and export orders trended down throughout the quarter.
In spite of slowing economy, commercial rental rates in Taipei are expected to grow across the board in 2012. In the office sub-sector, while demand for office space – especially from financial institutions and multinational corporations – has increased in Q211 to its highest level since 2006, supply will be restricted until at least 2012.
In the retail sub-sector, domestic and international retailers have both expanded operations, especially fast fashion retailers such as Zara. Retail supply will remain limited into 2012. Taiwan’s robust economy and manufacturing output have seen a high net absorption of high-spec industrial space, again in the face of limited supply. In May 2011, net take-up was at its highest level since April 2004.
Taiwan’s commercial property sector benefits from closer economic ties between Taiwan and mainland China. This includes the Memorandum of Understanding (MOU) for financial cooperation, the Economic Cooperation Framework Agreement (ECFA) and the new Chinese Free Independent Traveller (FIT) agreement, which increases the visiting rights of mainland Chinese individuals to Taiwan. The retail and hotel–tourism property sub-sectors are expected to benefit the most from the FIT agreement.
The Taiwanese government instituted a luxury tax in June 2011, largely to stabilise the housing market, one of the main sources of inflationary pressures on the economy, and to dissuade speculation. Anyone who sells vacant land and non-residential properties within two years of buying will have to pay a 10% levy, while those who sell with one year face a 15% tax. The measure has cooled down the residential property market as intended but the commercial property market has maintained its growth, despite the new tax.
Some of the key opportunities in the real estate market include:
- Stronger economic ties between Taiwan and mainland China are boosting the Taiwan commercial property market. Some key risks to the current real estate market include:
- Another global economic slowdown, especially affecting China, the US and Japan, would weigh heavily on Taiwan’s export-heavy economy.
According to CBRE, major leasing transactions in Taipei in Q211 included; Allianz Taiwan Life Insurance taking a 2,160 ping space in Sinyi Building; Cathay Health Magement Consulting taking a 1,010 ping space in the Cathay Dunnan Commercial Building; AXA taking a 590 ping space in the Shin Kong Xinyi Financial Building; King’s Town Bank taking a 410 ping space in the Hung Kuo Building; and Volkswagen Financial Services AG taking a 380 ping space in the Sumitomo Building.
Business Monitor International's Taiwan Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Taiwan's Real Estate industry.
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