Taiwan real estate transaction volumes down 19% to USD825.5m in Q3

Find out how each sector performed during the quarter. 

A recent Savills report says market activity was generally sluggish as transaction volumes in the commercial property sector totalled NT$25.6 billion (approx. USD825.5 million) in the third quarter of 2022, down by 19% YoY. 

Investor sentiment for factories and industrial offices is especially strong, accounting for 39% (NT$13.7 billion) and 36% (NT$12.8 billion) of total transactions respectively. End-users from technology and manufacturing industries expanded production lines or upgraded office space slowly in consideration of the potential economic headwinds.

Here’s more from Savills:

However, investors, such as insurance companies and investment institutions, showed a strong appetite for logistics and large-scale industrial properties. As the interest rate hike compressed the yield spread for the office sector significantly, industrial properties providing a rental yield ranging between 3% and 4% with a long-term lease or a sale and lease back structure attracted investor attention. In Q3/2022, insurance companies invested a total of NT$16.6 billion in industrial property and contributed 40% of industrial deals in the first three quarters of 2022. 

The office sector is still on a gentle upward trend as the healthy labour market is supporting the growth of prices and rents. Office leasing sentiment is positive and average rents of Grade A offices in Taipei City may rise by 2% in 2022 and overall vacancy rates hover at an historically low level of 3%. However, the increase in mortgage rates and the rising cost of office renovation made buyers more cautious and consider renting office space instead of purchasing. 

In terms of the land market, seven pieces of large-scale industrial land in Taoyuan Aerotropolio released by the government were sold for NT$22.7 billion pushing total transaction volumes this quarter to NT$61 billion. These deals reflected the strong demand for modern logistics and Taoyuan County is the most favourable destination for end users of industrial property. 

However, the land market, in general, is facing more challenges as residential land deals shrank by 80% YoY over the same period. The strict credit control for land mortgages and the interest rate hike coupled with the upcoming local election caused developers to sit on the sideline. The land and residential sectors might start to feel pressure for a price correction in the near term.