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With interest rates kept low, '14 home prices may stablize: analysts

TAIPEI--Local home prices are likely to be stable in 2014 as Taiwan remains awash in liquidity following a decision by the central bank to leave its key interest rates unchanged for 10 quarters in a row, market analysts said Wednesday.

However, as Taiwan is scheduled to hold local government elections at the end of this year, political uncertainty is expected to make some potential home-buyers cautious, which could lead to a small drop in transaction volume, the analysts said.

According to Sinyi Realty Co. (信義房屋), one of Taiwan's leading property agencies, residential and commercial property transaction volume in Taiwan for 2013 rose about 10 percent from a year earlier.

Last year, the realtors said home prices in the downtown areas of the country's six major cities and counties — Taipei, New Taipei, Taoyuan, Taichung, Tainan and Kaohsiung — added 11-22 percent year-on-year.

Tseng Ching-der, an analyst with Sinyi Realty's research division, said the growth in home prices shows that the local property market was driven by ample funds since the central bank has maintained high liquidity.

Some buildings equipped with elevators in Taichung and Taoyuan fetched almost NT$200,000 (US$6,666) per ping (one ping equals 3.3 square meters) on average, up about 20 percent from a year earlier, representing further evidence of high liquidity in the market, Tseng said.

Political Unease Could Hold Home Seekers Back

Tseng said that with interest rates low and inflation expected to rise, these positive leads could encourage buyers to enter the market and become more willing to accept the already high prices.

Although Tseng was upbeat about home prices, he cautioned that market sentiment in the second half of this year could be dampened by political unease that could prompt some home buyers to stay on the sidelines, which would impact transaction volume.

In addition, Tseng said that as the U.S. Federal Reserve has decided to scale down its monthly US$85 billion bond-buying program by US$10 billion from January and could continue to cut more fund injections in the future, long-term interest rates are likely to go higher, making home transaction volume slightly lower.

Shining Building Business Co. (鄉林建設) Chairman Lai Cheng-i said he is optimistic about the local property market, in particular in northern Taiwan, where land is scarce, which keeps home prices high.

Lai said that with the government gearing up to further liberalize the country's economy, foreign investors are expected to establish footholds here, giving a boost to the local property market.

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