Taipei - Taiwan's property market, hit hard in the last few months by the global downturn and a drastic domestic stock plunge, is likely to enter a recession from next year, property dealers and analysts said. "Beginning next year, the property market here is likely to see obvious slowdown, which could last two to four years," said Chang Chin-oh, land economics professor at Taipei's National Chengchi University.
Stanley Su, senior researcher of Sinyi Real Estate Inc, a leading Taiwan property brokerage group stressed that even with the slowdown, its scale would be smaller in Taiwan than that in other countries.
"Since the market rebounded from 2003 when most of the world was troubled by SARS (Severe Acute Respiratory Syndrome), local property prices have only rebounded about 30 per cent, which, compared with other countries, are relatively smaller," Su said.
"Even with the subprime loan mortgage crisis and current financial turmoil troubling the world, the scale of the downturn would be small in Taiwan because its property prices have not grown as sharp as other areas," he noted.
Meanwhile, Chang said the spillover of the US financial crisis has battered the local financial institutions, forcing them to be more cautious in making loans available, which sharply affected both prospective house-buyers and builders.
Worst yet, the sharp tumble in the local stock market of the past months further weakened sentiment to buy or build because many house buyers and builders obtain their funds from the stock market, Chang said.
The local property market experienced a short-lived boom in the second quarter of this year due mainly to expectation by investors and home buyers that President Ma Ying-jeou could help boost real estate prices with his China-engagement policy.
Ma of the China-friendly Nationalist Party (or Kuomintang) promised to largely remove current restrictions on cross-strait economic exchanges and Chinese investment in commercial property on the island.
But with the US subprime crisis, followed by the recent financial calamities in the US, the property market is almost certain to turn for the worse in the third and fourth quarters, market analysts said.
"The near-term of the property market here is tipped to be affected by the global conditions and the local stock performance," said Jiwei Tang, analyst of Yuanta Financial Holding, which has lowered the 2009 earnings forecast for the construction sector by 38 per cent.
According to Sinyi Real Estate Inc's Commercial Brokerage Department, commercial property prices in the capital dropped up to 20 per cent in the third quarter, compared with the same period last year.
The drop was due mainly to the financial squeeze of sellers who anxiously sell their property for cash, Sinyi said.
Within Taiwan, commercial property transactions amounted to 1.58 billion US dollars in the first nine months, a drop of 0.3 per cent from the same period last year, international property investor Jones Lang LaSalle said.
It predicted the full-year 2008 transaction amount to stand at just 2.18 billion US dollars, a sharp drop of 30 per cent compared with 2007.
Transactions of second-hand houses also dropped 10 per cent in September in the capital compared with the previous month, house brokerages said.
Chang said in the past, slowdowns in the island's property market usually lasted five to seven years, but with the increase in market transparency and foreign investments in the local property market, the span of the slowdown has shortened, so that the next downturn cycle could last to 2010 or even 2012.
He said easy access to information has made the market more transparent, allowing banking institutions, government agencies, property developers and investors risk management. Also, a more liberalized market policy has encouraged more foreigners to invest in the local real estate industry.
Su agreed that a slowdown is inevitable, but it would be difficult to accurately say that the next downturn cycle will last two to four years.
"There are many factors affecting the real estate market, making it difficult to say how long the slowdown would last," he said.
