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Taipei Time
One of Asia’s most frequently overlooked cities demands attention
| Text : Elizabeth Kerr | Photo : www.thinkstockphotos.com |
Taipei is one of those cities that flies just under the radar. It’s by no means a small town: it boasts a metropolitan area population of almost seven million, has one of Asia’s most vibrant arts and culture industries and long ago shook off the negative stigma of “Made in Taiwan” to become a major technology centre. The towering Taipei 101 has become a symbol of the city’s emergence as a major economic player in Asia, with the requisite luxury hotels and high-end brands opening outlets in its toniest districts. Popular Japanese retailer Uniqlo is one of a raft of brands entering the Taiwan market, and it did so by opening up in the Xinyi district’s new Uni-Hankyu department store, part of a mixed use development which is also home to the new W Hotel, with Le Meridien just down the street. Nonetheless, Taipei is often the forgotten sister in Asia, but it’s staring to make a lot more noise.
The biggest influence on Taipei in the past few months is easily the Economic Cooperation Framework Agreement signed between China and Taiwan in June. The ECFA trade agreement officially came into effect in September, and property agent and consultancy Jones Lang LaSalle stated in its third quarter property report that the agreement is already starting to have a positive effect on Taipei that is being felt in every sector of the property market.
The unemployment rate is at its lowest point since December 2008, and strong economic activity is improving business sentiment, consumer spending and hiring. The financial sector is improving quickly and office rental rates in Xinyi have been spurred by financial institutions’ expansion and resulting demand for space. At the head of the pack are Mainland Chinese organisations — from finance, IT, petrochemicals and transport. Overall things look strong in the office market. Of Taipei’s 12-month forecast, JLL stated, “Although the global economic recovery has slowed down in 2H10, Taiwan’s overall economy is forecasted to remain on solid footing due to a number of reasons. One, an improvement in the labour market has been witnessed, with the unemployment rate decreasing from 5.8 percent in 2009 to 5.3 percent in 2010. Two, interest rates remain low at 1.375 percent, which encourages investment. Three, the signing of the ECFA will benefit Taiwan’s exports.”
The investment front is looking strong too. Almost NTD12 billion (HK$3 billion) worth of retail investment properties changed hands in the third quarter — 58 percent of all property transactions at the same time. As is the case on Hong Kong’s Russell Street, increasing numbers of Mainland tourists travelling to Taipei, and shopping while they’re there, has led to moderate investor confidence in retail. “We anticipate that investment in the fourth quarter will remain strong due to the low interest rate and the improving relations between China and Taiwan,” JLL predicted. Reporting similar trends, Colliers International also cited independent Mainland travellers as a major source of investor confidence and indicated 27 percent growth year-on-year in the commercial sector over 2009. Colliers also predicted that ECFA would be one of the factors affecting this growth in its own third quarter market report focusing on Taipei’s central business district.
With all this finance and retail activity it’s not surprising to discover that residential property prices are rising. The trickle down of strong economic indicators is to be expected, but Taipei is also quickly catching up to major Asian centres like Hong Kong, Singapore and Bangkok up on the luxury standard front. The short explanation is that low interest rates and improving cross-strait relations are the main drivers here. According to JLL off plan sales totalled almost NTD17 billion in the third quarter, with luxury development taking the lead in price hikes. Not surprisingly, concern erupted over the rising prices prompting the government to implement a series of cooling measures including credit controls on certain districts within the city and in the country and stricter land and construction regulations. “After witnessing a correction in transaction volume, the price and transaction volume not only rebounded in 3Q10 but hit historical highs. Apart from the low interest rate, the ECFA trade agreement has been the main driver for the residential market. The price for luxury residential projects grew to NTD844,000 per ping [approximately three square metres], while those for the mass residential developments stayed at NTD499,000 per ping. As a result of the lack of prime land and difficulties in pushing urban renewal projects in the CBD, we anticipate that the residential prices are unlikely to witness a correction,” said JLL.
Taipei has its challenges ahead of it to be sure. Outside the core, office vacancies are rising and rental rates are decreasing and are beginning to feel the effects of decentralisation due to competition on the city’s outskirts and its aging buildings. JLL predicted 20 percent vacancy for some locations in the next quarter. But general indicators are strong, with GDP growth hovering at around 7 percent and visitor arrivals up over 20 percent from the same time in 2009. If things stay on an upward trajectory, Taipei will soon be known for something other than a really tall building.
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