Asia Pacific 2016 Round-up and 2017 outlook for real estate: Part 3 – Greater China and Taiwan

As the year draws to a close, Knight Frank has put together a four part round up which looks how residential property markets have fared across the Asia Pacific region in 2016 and the outlook for 2017.

Part three looks at Greater China and Taiwan.

GREATER CHINA
David Ji, Head of Research, Knight Frank Greater China

The Mainland’s residential market improved throughout 2016 with more cities seeing price increases. Home prices in first-tier cities and major second-tier cities in particular, recorded strong growth,

prompting the government to maintain or re-introduce home purchasing schemes in these cities. On the other hand, destocking inventory remains a major task in 2017, particularly for lower-tier cities. Looking ahead, the Central Government will continue home purchase restrictions on these cities in 2017, with more cities set to join should their housing markets overheat.

In Hong Kong, total residential sales are expected to reach over 50,000 in 2016, largely on par with previous years. Given the recent price recovery partly prompted by investor interest, some of which are from the Mainland, the Hong Kong Government is keeping up various price cooling measures such as lowered Loan-to-Value ratios, tightened stress test requirements and a set of stamp duties. It has recently increased stamp duty for second home buyers to 15% in an effort to curtail price.

However, as prices reached record levels, affordability remains a major concern for many potential homebuyers. Meanwhile, in recent years, Mainland developers have been increasingly active in residential land site acquisitions in Hong Kong, a trend that is likely to continue in 2017.

TAIWAN
Andy Huang, Associate Director for Research, Knight Frank Taiwan

The real estate market performance remained lacklustre in 2016 with commercial property transaction volumes declining 48% year-on-year. However, rents and vacancy rates of the office market remain stable.

In the residential market, transaction volumes declined by 35% from last year; Taipei experienced its worst decline at 68% from last year. The prime residential segment was not spared either – as a result of the Government’s cooling measures, including high holding taxes and credit controls – with transaction volumes slumping by 63% from the year before to a four-year low.

Come 2017, price correction is expected in the real estate market in Taiwan. The Nanshan Plaza in Xinyi district is expected to complete in 2017, bringing one million square feet of new supply to the office market. We expect this to increase the movement of some tenants outside of the CBD into CBD Taipei. With that, we expect the demand for office space in Taipei to be active in 2017.

In the residential market, severe restrictions on mortgages for luxury houses resulted in a drop in transactions and prices of such assets. Since the cooling measures in Taiwan are targeted at luxury housing, the market for occupier residential property is expected to bounce back.

To sum up, the cooling measures in Taiwan are easing with the residential market expected to rebound with the low interest rate. Interest rates are expected to rise 0.25% in H2 2017. However, Taiwan is still in a low interest rate environment and it is therefore, expected to have limited impact on residential markets. We may see some plateauing both in commercial and residential price growth, and some downward pressure in price, but it is unlikely to underperform 2016.

The last and final entry of this series will focus on India, Australia and Cambodia.

 

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