Cfa Level 3 Note Essay

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August Title - 6 August 2010
Report 2011

Taipei Property Market
Snapshot 2Q11

Taiwan’s Central Bank raised its rediscount rate by 12.5 bps to
1.875% in June (effective 1 July), the fifth increase since June
2010. Despite the increases, the policy interest rate remains low to encourage economic growth.
In 2Q11, total investment in property fell significantly by 36.2% yo-y to NTD 19.02 billion (USD 666 million) due mainly to the dramatic drop in transaction volume in the Neihu Technology
Park. Since last year, property prices in this area have achieved high levels.
The steady warming of cross-Strait relations has had a positive impact on the commercial property market. With the economic turnaround and growing investment in Taiwan by MNCs, the office leasing market has started to rebound and will likely see even stronger growth in the near future.

2 On Point • August 2011

Property Market
Economy
Taiwan’s Central Bank raised its rediscount rate by 12.5 bps to
1.875% in June (effective 1 July), the fifth increase since June 2010.
Despite the increase, the policy interest rate remains low to encourage growth and should give domestic investors good access to funds for investment, although we also expect more foreign interest in Taipei’s office market.
Furthermore, the Special Goods and Sales Duty (commonly called the Luxury Tax) came into effective in June and had some impact on the investment market. In line with the US debt crisis and the
European sovereign debt crisis seen in 2H11, Taipei’s high level property prices may witness a slowdown in the investment market.
We expect the retail and hotel sectors to enjoy the most direct benefits from the opening of visas to free individual travellers from
Mainland China. Currently, commercial buildings in Taipei with poor rental rates are being renovated as business hotels, especially in the western area of Taipei and Xinyi District.

Key Economic Indicators
Real GDP Growth
(2Q11 y-o-y)

4.9%

Unemployment rate
(June 2011)

4.35%

Rediscount rate
(August 2011)

1.875%

Mortgage rate*
(June 2011)

1.827%

CPI
(July 2011 y-o-y)

1.3%

Exports
(July 2011 y-o-y)

17.6%

Cumulative visitor arrivals
(June 2011)

2,855,569

Cumulative visitor arrivals
( June 2011 y-o-y)

4.51%

Source: DGBAS, Global Insight, bureau tourism
* average mortgage rate of the five major banks: Bank of Republic of
China, Taiwan, Taiwan Cooperative Bank, First Commercial Bank,
Hua Nan Bank and Land Bank of Taiwan, August 2011

Grade A Office Market
In 2Q11, vacancy rates in Taipei’s Grade A office market continued to edge up from 1Q11, seeing a slight drop of just 0.2% q-o-q to
14.8%. Net absorption in the quarter was 800 ping (2,700 sqm) compared to 10,000 ping in 1Q11. Despite this, the market was active in the quarter. In contrast to new demand for office space in
1Q11, the main driver behind tenant relocations in 2Q11 was the search for a suitable location for business and we anticipate more physical take-up in 2H11.

Property Clock – Grade A Office

With improving demand from financial institutions in Xinyi and landlords’ positive outlook of rental rates in Dunhua North, gross rents edged up 0.7% q-o-q in Xinyi and 0.2% q-o-q in Dunhua
North. Other sub-markets, such as Dunhua South and the NonCore CBD, saw a small decrease in gross rental rates as landlords competed to secure tenants. Overall gross rents increased 0.2% qo-q in 2Q11 to NTD 2,412 per ping per month (USD 24.8 per sqm per month), the second consecutive quarter of increase.
Source: REIS 2Q11, Jones Lang LaSalle

On Point •August 2011 3

Performance by sub-market
Financial Indices
Rental Rate
3,500
3,000
2,500
2,000
1,500

500
0
2Q11

1Q11

4Q10

3Q10

Dunhua South

2Q10

1Q10

4Q09

3Q09

2Q09

Dunhua North

1Q09

4Q08

3Q08

2Q08

1Q08

Xinyi

4Q07

3Q07

2Q07

(NTD/Per Ping PM)

1,000
Show More

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