Stock rout puts majority off real-estate buys: survey

Share prices are seen as leading indicators that are ahead of actual economic performance by three to six months, a Sinyi Realty research manager said

  • By Crystal Hsu / Staff reporter

The stock rout has driven the majority of Taiwanese to postpone plans to buy real estate, as they fear the TAIEX’s poor performance might foreshadow an economic downturn that would erode their income, a survey by Sinyi Realty Inc (信義 房屋) showed yesterday.

Of the survey’s respondents, 57 percent said they had put house purchase plans on hold after the local stock market slumped 16 percent from a peak of 18,600 points in January to 15,600 points earlier this month.

The TAIEX’s slump is compromising down payments for 25 percent of prospective buyers and raising doubt regarding economic showings for another 32 percent, leaving only one-third unaffected, the survey said.

Photo: CNA

“The property market this year might not receive a boost from investment gains as seen in the past two years following repeated rallies in the TAIEX,” Sinyi research manager Tseng Ching-der (曾 進 德) said.

Small and open, the local stock market is not spared from price corrections across the globe as major central banks steeply hike interest rates to tame inflation, a policy move that tends to induce an economic slowdown.

Value losses are not limited to stock investments as digital currencies, popular among young and tech-savvy investors, incur heavier losses, Tseng said.

Share prices are widely deemed leading economic indicators, ahead of actual economic performance by three to six months, he said.

The stock rout reflects institutional investors’ concerns about a possible economic turnaround in the second half of this year and beyond, even though Taiwanese companies have provided rosy earnings guidances for this year, Tseng said.

Inventory corrections are bound to hit leading Taiwanese electronics suppliers that have benefited from aggressive inventory build-up by global clients over the past two years to cope with supply chain bottlenecks linked to COVID-19 lockdowns, heavyweight stock analysts have said.

The benefits seen during the COVID-19 pandemic would rapidly disappear as the US, Europe and other markets have chosen to live with the virus, analysts said, citing poor sales of smartphones and laptops as evidence.

A global financial crisis would seriously hurt Taiwan’s housing market, as in 2008 and 2009, but it would quickly recover from transient and isolated incidents like the level-3 alert in May lasy year, Tseng said.

If COVID-19 infections stabilize and the TAIEX stops bleeding promptly, the property market would soon come out of the woods, Tseng said, adding that it would be a disaster if price corrections persisted.

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