Real estate investment in Taiwan : an examination of the recent opening of real estate markets to foreign entities

Abstract

In hope to revitalize the slumping real estate markets and sluggish economy, the government of Taiwan, Republic of China, has recently opened up direct real estate investment opportunities to foreign entities. In conjunction with the joining of WTO, Taiwan hopes that foreign funds and maybe even investment from Mainland China will infuse capital and uplift the markets. Nevertheless, the potential impacts to the real estate industries have not yet been fully examined. Several professionals and academia suggested that the projected effects of direct investment into Taiwan's real estate markets will not seem to be as optimistic as how the government has hoped for. Political uncertainties, slow market growth, low transparency, oversupply of products, and different real estate valuation expectations will prohibit bullish direct investment activities. The net result is complicated. A closer look shows that foreign capital will create a short-term turbulence in the real estate markets and further exaggerate value discrepancies between market sectors and geographical locations. As the formation of AMCs (Asset Management Corporations) will consolidate NPL's and thus further depress market value, the deeply discounted high quality properties in different regions, the possibility of securitizing real estate assets, and the continuing of general foreign business development will attract real estate investment opportunities into different product sectors and locations, and thus create value disparities. Long run effects will depend on the island's political and economic situations. Overall, as Taiwan is preparing to enter the WTO, the opening of real estate industries to the international marketplace will standardize valuation methods, reorganize industry structure and make the markets more transparent.