• Investing in Taiwan Commercial Property: A Complete Guide

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    Taiwan was named the world’s third-best investment destination by US-based Business Environment Risk Intelligence SA in 2018, only behind Singapore and Switzerland.

    This small island has gained more interest since the trade war intensified between the US and China. Besides, the protests in Hong Kong have resulted in more investments from Hong Kong.

    Major local and foreign companies, such as Google, plan to invest hundreds of millions of US dollars in Taiwan in the coming years. The commercial property market has been strong recently and is not as overpriced as the residential market.

    In this article, I explain how it works when investing in Taiwan’s commercial property market as a foreigner, how much you need to pay in tax, where you should buy, and more.

    Let’s get started.

    Can foreigners buy commercial property in Taiwan?

    Taiwan has favorable foreign property ownership regulations compared to Mainland China and many Southeast Asian countries. Here, you can purchase property as an individual or through a company.

    Having said that, you need government approval first, which is based on a reciprocal arrangement. Simply put, Taiwanese companies and private individual investors should be allowed to acquire real estate in your home country or in the country where your company has its main office.

    Mainland Chinese are subject to stricter regulations and have been able to invest in Taiwan real estate since 2002. On the contrary to other foreigners, they need to make applications to the Investment Commission of the Ministry of Economic Affairs (MOEA) and sometimes to the MOI.

    You can also establish a local company referred to as Foreign Investment Approval (FIA) companies. This will allow you to acquire and lease real estate in Taiwan.

    Even if free-hold property is most common, we see increasingly more properties available under long-lease arrangements. Leasehold titles for land are usually offered for a maximum period of 20 years.

    Superficies, on the other hand, sometimes have a longer validity and up to 50-years.

    The Commercial Property Market in Taiwan

    The commercial property market has flourished recently and mainly due to the ongoing trade war between the US and China.

    In 2018, acquisitions of income-producing properties (including office, retail, hotel, industrial, hotel apartments, and senior housing) increased by a whopping 91%.

    Increasingly more Taiwanese has moved, or plan to move, operations from the mainland, which has resulted in reduced vacancy rates and an increased demand for commercial property.

    According to Collier’s, demand has mainly been driven by companies that upgrade or expand since 2018. At the same time, we see a greater demand for flexible workspace companies who are now grasping market shares.

    The supply remains stable for now but will grow after 2024 that will push vacancy rates.

    Hotels & Resorts

    The amount of tourists has increased in Taiwan recently, we see a particularly big increase among Japanese, South Korean, Southeast Asian, and North American travelers. During the first four months of 2019, we saw an increase of 10.64%.

    Looking at Chinese travelers alone, we saw an increase of 18.53%, which is not bad.

    According to the American Chamber of Commerce in Taiwan, the Taiwanese government is mainly to thank due to its Tourism 2020 initiative. Thanks to this program, travelers have been able to enjoy subsidies fo up to NTD 1,500, for example.

    Due to the increasing demand, more hotel operators decide to open new hotels in the Taiwanese market.

    Office Space

    Taipei suffers from having too many aging office buildings, it’s said that by 2024 around 30% of all office buildings will be older than 20 years, according to JLL.

    We see a problem with a low supply of new property, at the same time as the demand increases.

    Some of the drivers of the Taiwanese office space market are, as mentioned, due to relocation from the mainland back to Taiwan. Some of the main industries include finance, IT, and technology. The coworking space market also grows.

    In Q3 2019, the vacancy rate was the lowest in 10 years, mainly due to a low supply.

    Industrial Real Estate and Warehouses

    Taiwan had the highest GDP growth among the Four Asian Tigers (Hong Kong, Korea, Singapore, and Hong Kong) and we have seen an increased demand for industrial real estate. Some of the key drivers are:

    • The government banning illegal factories on agricultural land (2016)
    • Logistics facilities, driven by the growth in eCommerce
    • The ongoing trade war between the US and China

    According to Colliers, Taoyuan City was the most active market in Taiwan from 2011 to H1 2019, with a total transaction value of NTD 70.4 billion (USD 2.2 billion). That equals to 25% of Taiwan’s total, which is significantly high.

    The Taiwanese economy relies heavily on the industrial sector, which results in an increased demand for industrial real estate, such as advanced logistics facilities and warehouses.

    In October 2019, Google announced that it will invest as much as USD 851 million in data center operations in Tainan, a municipality located on the Southwest Coast.

    Best Cities to Buy Commercial Property in Taiwan

    Taiwan might be a small island, but you’ll find various cities with unique qualities. Let’s start out with one of the most obvious choices when investing in real estate.

    Taipei

    Being the capital of Taiwan and having a population of around 7.5 million people, Taipei draws the most attention and receives the most investment from local and overseas companies.

    A great majority of Taiwan’s IT and technology companies are headquartered, including well-known brands like HTC and Asus.

    Even if Taipei has one of the most over-priced residential real estate markets with comparably low yields, the commercial market has a bit more to offer.

    It’s not only voted as one of the best places to do business in the world, but also the best place for expats to live and work.

    Taoyuan

    Taoyuan is wedged between Hsinchu County and New Taipei City and has been one of the most active investment destinations in the past decade.

    Having around 2.5 million people, real estate prices are lower compared to the capital and it’s home to many industrial parks and tech company headquarters.

    Renowned names such as MiTAV, Quanta, Nanya Technology, and HTC have manufacturing operations in Taoyuan. It’s one of the preferred cities for production of electronics and semiconductors, making it an interesting destination for investments in industrial property.

    Tainan

    Being located in the Southwestern parts of Taiwan, Tainan is the oldest city in Taiwan and has a history of over 200 years. In the past years, Tainan has received increasingly more investments.

    It’s the home to the Tainan’s Southern Taiwan Science Park, where Innolux has decided to invest NTD 70 billion (USD 2.3 billion).

    As mentioned, Google is another major company that will invest as much as USD 851 million in data center operations in Tainan.

    Commercial Property Taxes

    Let’s review some of the tax you need to pay when acquiring property in Taiwan as a foreigner.

    Transfer Tax

    A transfer tax of 2% to 6% is levied and multiplied by the sales value. The tax is paid by the buyer.

    Stamp Duty

    A stamp duty of 0.1% to 0,4% is multiplied by the sales value and paid by the buyer.

    Registration Fee

    The buyer also pays a registration fee of 0.1%.

    Notary Fee

    The notary fee is generally 0.01% to 0.1%.

    Legal Fees

    Legal fees of 0.05% – 1% of the property value is paid by the buyer.

    Real Estate Agent’s Fee

    The estate agent’s fee is generally 1% to 2%.

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