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Briefing Sales and Investment May 2018

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Savills World Research Taiwan Briefing Sales and investment May 2018 Image: Xinyi district, Taipei City SUMMARY The commercial property market rebounded in 2017, with the annual transaction volume increasing by 11.2% YoY. The strong growth trend in exports Insurance companies remained will support Taiwan’s GDP growth to cautious and their total investment “Moderately rising interest rates reach 2.3% in the coming year. volume shrank to NT$9 billion this year, the lowest figure of the past ten and strong property demand The demand for expansion years. drove transaction volumes to reach from the IT and manufacturing NT$73.25 billion in 2017, an increase The land market is booming, with industries will provide a positive of 11.2% year-on-year (YoY). transaction volumes up 25.7% YoY to NT$115.8 billion in 2017. foundation for the market’s The IT industry became a major recovery.” Erin Ting, Savills Research & buyer in 2017, accounting for 20% Home buyers returned to the of market share and acquiring a total market and motivated developers Consultancy of NT$14.4 billion worth of industrial to aggressively expand their land office and factory. banks. savills.com.tw/research 01 Briefing |Taiwan sales and investment May 2018 Economic overview TABLE 1 The recovery of the global economy Major economic indicators, 2017 propelled Taiwan’s exports to grow 13.2% in 2017, particularly in the areas Indicator Comments of merchandise trade (+21.1% YoY), plastics and rubber products (+15.3% 2017 GDP growth forecast (%) 2.58 2016 GDP growth (%): 1.48 YoY), base metal (+18.4% YoY) and 2016 GDP per capita (US$): 2017 GDP per capita forecast (US$) 24,269 IC (+18.1%). GDP growth improved 22,540 from 1.48% in 2016 to 2.58% in 2017 US$ exchange rate (Dec 2017) 29.98 2016 average: 32.32 and should continue to improve in Export growth (% YoY) 2016 export growth (% YoY): 2018 with an estimated GDP growth 13.2 (Jan-Dec 2017) -1.8 of 2.3%. Unemployment rate (%) 3.71 2016 (%): 3.87 (Nov 2017) The tourism market remained slow, Inbound arrivals 10,739,601 2016 inbound arrivals: as the number of Chinese tourists (Jan-Dec 2017) (0.46% YoY) 10,690,279 decreased by 15% to three million Benchmark interest rate (%) 1.375 Dec 2015: 1.625% overall in 2017. The tense relationship Rate (%)* = 1.7-2.1 between Taiwan and China seriously Financial terms impacted Taiwan’s tourism industry; LTV (%)* = 60–70 the number of visitors from China *Note: Rates and loan-to-value (LTV) ratios may vary depending on the credibility of individual borrowers. Source: Directorate General of Budget, Accounting and Statistics, central bank, Savills Research & Consultancy dropped by 30% from its previous peak in 2015. Fortunately, tourists from GRAPH 1 Japan, South Korea and Southeast Commercial real estate transaction volumes, 2009 – Asia balanced the decline of the 2017 China tourist market, and total tourist numbers for 2017 reached 10.79 Q1 Q2 Q3 Q4 million, up 0.3% YoY. 140,000 120,000 The improvement of Taiwan’s economy, however, did not have a 100,000 positive effect on retail sales. Due to the stagnation in the tourist market 80,000 and conservative domestic consumer million spending, total sales in the retail sector 60,000 NT$ in the first eleven months of 2017 increased by only 1%. Department 40,000 stores experienced even lower growth – less than 1% - and tried to increase 20,000 foot traffic through remodeling or 0 allocating more space to food and 2009 2010 2011 2012 2013 2014 2015 2016 2017 beverage sectors. Source: Savills Research & Consultancy Major commercial real GRAPH 2 estate transactions in Land and superficies land transaction volumes, Q4/2017 2012 – 2017 A new capital gains tax continued to Q1 Q2 Q3 Q4 have a negative impact on investors, 160,000 while end-users for plant expansions dominated the property market. The 140,000 total value of property transactions in 120,000 Q4/2017 was NT$19.1 billion, down 29.6% quarter-on-quarter (QoQ) 100,000 and up 63% YoY. In general, the 80,000 commercial property market recovered million slightly in 2017, with total transaction NT$ 60,000 volumes reaching NT$73.2 billion, an increase of 11.2% compared with 40,000 2016. 20,000 The demand for factory and industrial 0 office is increasing steadily. Four of 2012 2013 2014 2015 2016 2017 the five largest transactions concluded Source: Savills Research & Consultancy savills.com.tw/research 02 Briefing |Taiwan sales and investment May 2018 TABLE 2 in Q4 fell into this category; the two Major commercial real estate transactions, Q4/2017 biggest deals were located in the Neihu Technology Park. The largest Transaction Unit price Area acquisition was a newly-completed Date/Property Location amount (NT$ per Buyer (ping) (NT$ billion) ping) industrial office building close to the Xihu MRT station, which was Oct 2017 purchased by Chunghwa Post Life Chong Hong New Chunghwa Post Taipei City 6.42 9,423 740,000 Insurance Company for NT$6.42 Century Office Life Insurance Co. billion, equivalent to NT$740,000 Nov 2017 per ping. The occupancy rate of this Eaton Neihu Taipei City 2.3 9,564 540,000 CMI Property Ltd building reached 90% in the first year Headquarters after completion and is expected to Dec 2017 provide the buyer with a 2.8% yield. Lion Home Another notable deal was the sale of Land: Products Wugu New Taipei City 1.38 1,928 Hotai Motor 438,000 Eaton Neihu Headquarters to CMI Factory Property Ltd for NT$2.3 billion. The Source: Savills Research & Consultancy buyer plans to use the building for its headquarters. TABLE 3 Major land transactions, Q4/2017 The IT industry became a major property buyer in 2017, accounting for Transaction Unit price Area Date/Property Location amount (NT$ per Buyer 20% of market share, and acquiring (ping) (NT$ billion) ping) a total of NT$14.4 billion worth Nov 2017 of property across the industrial office (NT$8.99 billion) and factory Commercial land in New Taipei (NT$4.54 billion) sectors. Three 3.36 1,566 2,150,000 Eclat Textile Xinzhuang District City cities – Taipei City, New Taipei City and Hsinchu - were the focus of Dec 2017 60% of IT acquisitions. Another Commercial land in Highwealth active buyer was the professional Taichung City 2.2 1,095 2,010,000 Nantun District Construction investment institution, which Bestken contributed 17% of transactions, An industrial land Taoyuan City 2.0 8,868 230,000 Enterprises for roughly NT$12.8 billion. Major Limited deals included the NT$1.21 billion Source: Savills Research & Consultancy TABLE 4 Ten major sales transactions, 2017 Transaction Property Investment Rank Property amount Buyer type purpose (NT$ billion) Chunghwa Post Life Insurance Industrial 1 Chong Hong New Century Office 6.42 Investment Co. office 2 Bellezza Taipei Hotel 5.58 SPRINTA INC Hotel Investment 3 Nice Plaza and Nice Hotel 4.83 Nice Plaza Hotel Owner-occupy 4 Four floors of President International Tower 3.51 CTBC AMC Office Investment Uncompleted 5 Ching-Cheng Building (42% share) 2.71 PUJEN Land Development Investment Hotel Industrial 6 Prince Corporation Building 2.6 CyberPower Systems Owner-occupy office Industrial 7 Eaton Neihu Headquarters 2.3 CMI Property Ltd Owner-occupy office 8 En-bloc retail building in Ximending 2.2 Edora Park Retail Investment 9 UniBright Chemical Hsinchu Factory 1.5 Darwin Precisions Factory Owner-occupy Industrial 10 YOKO International Industrial Office 1.45 Weitien Electronic Owner-occupy office Source: Savills Research & Consultancy savills.com.tw/research 03 Briefing |Taiwan sales and investment May 2018 pre-sale of an industrial office in New NT$62.3 billion worth of land in 2017, development permits. In addition, Taipei City, purchased by Taiwan up 81% YoY. according to the amended registration Asset Management Corporation for regulations, construction permits investing purposes, and the NT$550 Taiwan’s total land transaction volume issued after 2018 cannot register the million foreclosure auction purchase increased by 25.7% YoY to NT$115.8 area for canopies and eaves. Thus, the by Panshin AMC of an industrial office billion. Land demand in Kaohsiung was reduction in the saleable area of future building. As well, several financial strong with total transaction volume development projects will directly holding groups attempted to revitalise recording a 150% growth. Three major impact land prices. their assets by transferring properties cities - New Taipei City, Taipei City to asset management companies, and Taichung City - also experienced Preferred asset class such as Fubon AMC and CITIC AMC. strong growth, with annual transaction and location volumes exceeding NT$20 billion Industrial property sectors, including Insurance companies turned quiet respectively. factory and industrial office, remained in 2017 with their total investment in a firm favourite among investors, with property shrinking by 62% YoY to Even though developers were keen total transaction volumes reaching NT$9 billion. The largest acquisition to purchase land lots, they focused NT$41.4 billion and accounting for made by an insurance company on quick-sale strategy, which means 57% of all commercial transactions. was a newly-completed en-bloc developers remained cautious as they Over 30% of these transactions industrial office building purchased evaluated land prices and locations, occurred in the Neihu Technology Park by Chunghwa Post Life Insurance in particular land lots that needed and Nankang Software Park, locations Company for NT$6.42 billion. reconsolidation or government preferred by insurance companies and Chunghwa Post Life Insurance Company had been aggressively GRAPH 3 searching for opportunities since 2016, and the en-bloc deal is their Significant transactions by property type, 2017 largest investment thus far.
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