Taipei US$1.3 billion retail building sale a test of foreign investor interest
Living Mall, a 12-storey complex close to the city’s business district, is being targeted at overseas investors who are wary of Taiwan’s high taxes and slow economy
The forthcoming sale of a 12-storey retail complex in Taipei will be a test of whether foreign property investors have enough faith in the potential of Taiwan’s real estate market to brave its high capital gains taxes and sluggish economy.
Living Mall, which has a gross floor area of 2.2 million square feet and nearly a thousand shops and is a short ride to the Xinyi business district, is being offered for sale with an indicative price of HK$10 billion (US$1.3 billion). It is targeted at investors in Singapore, Hong Kong and Shanghai, according to market watchers.
While the L-shaped building, constructed in 2001, has potential for redevelopment, it could be a hard sell given the tax implications plus the fact that the island’s economy has been stuck in low gear, with growth lingering in the low single digits since 2011 and projected to be at 2.42 per cent this year.
“When investing in Taipei, you need to understand the tax treatment, low stock levels, and the low yields, both of which are facts of life,” said Carrie Law, chief executive of property portal Juwai.com. “It is very difficult to make an investment case when you face 35 per cent capital gains tax on any acquisition,” she said.
“We don’t see a significant role for mainland China or Hong Kong Chinese investors in Taipei at the moment,” said Law.
According to Taiwan’s tax code, if a foreign company were to sell a property held for more than a year, it would have to pay 35 per cent capital gains tax, and 45 per cent if it is resold within a year.
In 2017, sales of commercial property investment in Taiwan totalled NT$67.1 billion (US$2.19 billion). If Living Mall were to sell for HK$10 billion, it will be equivalent to 60 per cent of 2017’s total investment property market in Taiwan.