Insurance firms dominate Taiwan’s commercial property market in Q1

They accounted for 32% of transactions during the quarter.

While low interest rates are driving up the housing market with the number of transactions nationwide up by 8.6% in 2020 compared to one year ago, the pre-sale housing market even witnessed a pick-up in price increases. This situation led the government to change direction, introducing several measures to cool the overheated residential market, including improving market transparency and prohibiting the resale of presale homes prior to signing the sales and purchase agreement. In a next step, Savills says there is discussion of raising capital gains tax rates to 45% or 35% for property resold within five years aimed at reining in speculative transactions. 

However, the commercial property market has remained active with transaction volumes in the first quarter of 2021 reaching NT$47.9 billion, up 50.3% QoQ and 127% YoY, according to Savills. The largest investment deal of the quarter was the sale of Far Eastern Sogo Dunhua Store for NT$13 billion via a share deal to Huang Hsiang Investment, for an average land price of NT$4.2 million per sq m. The buyer plans to tear down the department store after the lease expires, according to reporters. 

Here’s more from Savills:

Insurance companies, dominating the market by accounting for 32% of transactions, continued to hunt for property. Shin Kong Life as well as Fubon Life announced that they will further expand their property investments. Two other mega deals were concluded in the first quarter, when China Development Financial HQs and Raint Plaza were purchased by Shin Kong Life for NT$9.3 billion and NT$5.6 billion respectively. The former is for owner-occupation while the latter will remain a hotel and industrial office complex for investment, marking a 3.8% yield. 

Strong demand for industrial property is unchanged. Several technology companies, especially from the semiconductor supply chain, including KINSUS, Chunghwa Precision Test Tech and Phoenix Silicon International, spent a total of NT$12.3 billion in the sector, marking the second highest quarterly volume in the last five years. 

As technology is a key driver of economic growth, professional investors have started to target investment opportunities benefiting from the current technology boom. A notable deal is Raint Plaza, close to Hsinchu Technology Park with several floors leased to Qualcomm and Netflix, which attracted Shin Kong Life to purchase their first income property in Hsinchu. Land sites and commercial property close to existing technology hubs is proving popular, in areas such as Hsinchu, Taichung and Tainan. 

An increasing number of developers who used to focus on the residential sector, through sole purchase or joint venture, are redeveloping large abandoned factories into modern industrial parks. As a result, demand from end users and investors is expected to see industrial land prices rise this year.