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March 27, 2017

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'Not profitable': The Palace luxury homes fail at auction

TAIPEI, Taiwan -- Taipei's luxury home market thawed over the past few months but prices for The Palace — one of the most coveted residential complexes — remain uncertain after two of its units failed to sell at separate auctions on Wednesday.

One of the two units was being auctioned off by court and the other through Taiwan Financial Asset Service Corporation (TFASC), but neither saw a successful bid, although the luxury property market has seen a rebound with increases in transactions over the few months, estate agents said.

The price set for the TFASC auction was still too high to attract buyers, while the unit in the court auction comes with an existing tenant, which deterred potential bidders, the agents said.

The TFASC set the bottom price for the unit at NT$750 million, or almost NT$2.789 million per ping (3.3 square meters).

Xinyi Realty researcher Tseng Ching-der noted that at the peak of Taiwan's property market in recent years, price-per-ping for a unit of The Palace — located at the junction of Jianguo South and Renai Roads — reached as high as NT$2.982 million, and the average stood at about NT$2.7 million, according to the Central News Agency.

The TFASC-set price was unattractive judging from the present market conditions, which have been warming but long-term momentum remains to be seen, estate agents said.

For the unit in the court auction, the bottom price was set at NT$265 million, or about NT$2.36 million per ping.

Although the price was much lower than the market average for The Palace, the lease for the existing tenant will not expire until May 31, 2018, adding much risk to the target, estate agents said.

There are a lot of risks concerning court-auctioned properties. Potential buyers are not allowed to inspect the target units before placing their bids, according to the agents. It is difficult to estimate the cost of renovation after winning the bid.

And a unit coming with a tenant will make it even more complicated because the buyer will have to negotiate with the tenant how they can end the rental contract, the agents said.

Jessica Hsu, an executive from the HB Housing, said it was no surprise that the auctions failed because the deals did not seem profitable.

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