Taiwan and China real estate markets face supply and regulatory risks

Real estate markets in Taiwan and China are facing significant structural shifts and risks. In Taiwan, building permits for the first half of the year fell below 60,000 units, a rare decline attributed to central bank credit controls and a cautious lending environment. While housing completions reached a ten-year high, experts warn that the drop in new permits could lead to a supply shortage in the next three to five years. The pre-sale market has also cooled significantly, particularly in central and southern Taiwan.

In China, the real estate sector faces a potential ‘time bomb’ as land use rights for commercial, industrial, and office properties approach expiration. Many of these rights, granted in the 1990s, are set to expire in waves, particularly around 2026. The lack of clear renewal rules and the potential for high renewal fees based on current land values are creating investment obstacles and devaluing assets. This comes amid a broader crisis where developer debt defaults have reached approximately $130 billion.

Additionally, Taiwan’s housing management sector is under scrutiny following the Zhaoji incident, which highlighted systemic risks in the social housing model. The concentration of thousands of public housing units under a few private operators has created significant public cost risks when those companies face financial instability.