You may or may not have ever considered buying property in Taiwan. Either way, it can hopefully serve as an example of a country where you shouldn’t purchase real estate.
Those criteria are fine if you want to know which countries are within your price range. You probably have some sort of budget, whether large or small.
But judging real estate markets by their affordability (or lack thereof) doesn’t tell you anything about their potential for return. As investors, we’re much more interested in overall value – not just a price tag.
For example, Hong Kong has ranked among the priciest property markets in the world for over a decade. That hasn’t stopped values from doubling since 2010 though.
Cairo is one of the least expensive cities. Yet a large amount of oversupply in the suburbs is causing the market to remain stagnant.
Of course, we’re looking at Taiwan today. There’s very little profit left in the island’s property sector despite having a fairly strong economy in general.
Why is Taiwan Property Overpriced?
Taiwan has many positive aspects… at least on paper. Besides Macau, it’s the only territory in the Chinese sphere of influence where foreigners can own freehold property. Doing business in Taiwan is easier than in most places too.
But real estate prices are completely out of touch with reality. Property in Taipei costs around US$7,000 per square meter (US$650 per square foot). That means a 100sqm, two-bedroom apartment will set you back US$700,000.
The average local makes just US$1,500 per month though. In other words, they would have to work for almost 40 years to afford a small apartment!
Not only that, but rental yields in Taipei are abysmal at around 1.5%. That’s the lowest of all countries in Asia, and probably the market’s reaction to local’s inability to actually buy property in Taipei. Rent must be low, or else everyone would be homeless.
Hong Kong and Singapore might have managed to keep their high prices despite similarly low-yields and unaffordability to locals. Yet they’re also both global financial hubs, highly developed, and have a scarcity of land which Taiwan doesn’t.
Buyers from mainland China have propped prices up in Taipei so far. Beijing is now stopping their citizens from investing abroad though, adding to Taiwan’s dire situation and removing one of their few drivers of growth.
For all these reasons, Taiwan’s property market is just begging for a correction.
Better Alternatives to Taiwan
We don’t want to be the bearers of bad news if you were thinking about buying property in Taiwan. Here’s a few alternatives for your consideration.
Malaysia is growing faster than Taiwan and is at roughly the same stage of development. Furthermore, it’s practically the only country in Asia where foreigners can own land rather than just condominium units. Prices in Malaysia’s capital of Kuala Lumpur are a mere fraction of Taipei’s.
Cambodia might be one of the region’s poorest countries. However, business friendly policies, strong growth in excess of 7% per year, and some of the cheapest prices in the world for prime, city-center apartments mean lots of room for profit.
Singapore is one of the most expensive cities in the world for buying property, but still isn’t much pricier than Taiwan. The city-state is also one of Asia’s main financial hubs, is more developed, and has far less available land.
Rental yields, economic growth, and potential for appreciation in all three of these places are greater than in Taipei.
Taiwan is a bustling, dynamic country with many opportunities outside the real estate sector. But you should consider your options carefully before “investing” somewhere just because you personally enjoy the place.
Want to see some other markets you should avoid? You might be interested in our article about the four worst countries for investors in Asia.
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