TAIPEI, TAIWAN - TAIWAN'S real estate market, an Asia laggard in recent years, is seeing new signs of life as developers and property owners hope a new, China-friendly government will open the island to mainland Chinese investors.

In a possible sign of things to come, two groups of Chinese real estate executives made high-profile trips to Taiwan after the landslide victory in March of President Ma Ying-jeou, who wants to expand business and investment links with booming China.

The groups included top executives from such mainland Chinese heavyweights as SOHO China, Agile Property, R&F Properties and Vantone Estate Those trips yielded only a single property deal worth TW$1.32 billion (S$58.5 million), but developers are optimistic more will come and are hoping for double-digit price increases this year.

Multinational real estate services firms such as Jones Lang LaSalle, CB Richard Ellis and Savills have also been attracted to the island.

Expectations that Mr Ma would improve ties with China helped to propel transactions in the island's commercial property sector to TW$100 billion last year, double the rate of 2006.

'How much potential will properties have? Just look at Hong Kong. Its market size almost tripled in the past years thanks to the Closer Economic Partnership Arrangement it had with China,' said Ted Ying, a vice president of Shining Building Business TW , which signed the deal to sell luxury homes and a store to the mainland buyers.

Mainland Chinese were effectively banned from buying Taiwan property during former President Chen Shui-bian's administration despite ballooning investment by Taiwanese in China.

But new President Ma has pledged closer business ties with China, including opening the real estate market and establishing regular direct air links, in a bid to boost the island's economy.

The Chinese buyers who signed the recent deal used companies they had set up in Hong Kong to skirt investment restrictions.

Mr Ma has not set a timetable for announcing the China investment changes. But with weekend chartered flights set to kick off on July 4, hopes are rising that they will occur soon.

The growing optimism, especially for commercial properties like office towers and retail space, marks a turnaround for a market that has lagged others in the region for nearly a decade, mainly hurt by political tensions between Taipei and Beijing.

China has claimed sovereignty over self-ruled Taiwan since the end of the Chinese civil war in 1949, and has vowed to bring the island under its rule, by force if necessary.

Bubble?
'Investors have been active since the results of the presidential election were announced on March 22,' CB Richard Ellis said in a report on the market in the first quarter.

'Some investors are displaying a growing willingness to consider properties outside of Taipei, while some are willing to seek out greenfield (new) investment opportunities....Investment activities are expected to pick up pace in coming quarters.'

While most market watchers remain bullish on the market, others caution that too much enthusiasm too quickly could lead to a bubble. But such concerns may be premature, in a market that is just showing signs of early momentum after years in the doldrums.

'People are increasingly worried the market will become a bubble. We don't think so. There is still a long way to go,' Shining's Ying said.

Commercial property prices rose 10 per cent to record levels in the first quarter from the previous three months, according to analysts and brokers.

Office rentals, another gauge of the industry's health, may jump 20 per cent this year in Taipei and 15 per cent in 2009, Jones Lang LaSalle said recently.

'When foreign buyers invest in overseas real estate, they care most about rental yield, disposal gains and currency upside. Taiwan is a favourable market when you consider these criteria,' said Stanley Su, a director of Taiwan's top real estate broker .

Sinyi Market watchers add Taiwan has plenty of room to grow before catching up with markets like Hong Kong, which has seen explosive growth in recent years due in part to investment from China. -- REUTERS