Nov. 13 (Bloomberg) -- Taipei’s residential prices may rise 15 percent in 2010, more than in Singapore, Hong Kong and China, because there is more competition among homebuyers in Taiwan’s capital, according to CLSA Ltd. analyst Tayher Lim.

An increasing number of would-be buyers and smaller sites being auctioned has led to stiffer competition in Taipei, Lim said today. The difficulty of getting land may result in developers holding on to existing land without building new projects, causing a further supply squeeze, he said.

“Compared to Hong Kong, Singapore or China, Taiwan has more variable factors,” Lim said in a phone interview. “Most buildings are freehold in Taiwan and the government doesn’t own a significant amount of land, so there’s less it can control.” He didn’t give a forecast for prices in the other markets.

Perng Fai-nan, Taiwan’s central bank governor, met with executives from Bank of Taiwan, Land Bank of Taiwan and Taiwan Cooperative Bank on Oct. 28 to tighten loan-risk management as property prices advanced, James Yue, director-general at the central bank said Oct. 29.

Taiwan joined Singapore, Hong Kong, India and China in moving to prevent excessive property-market swings, after falling interest rates drove prices higher. Hong Kong on Oct. 23 tightened down-payment requirements for luxury homes for the first time since 1991. A month earlier, Singapore banned interest-only mortgages for uncompleted housing.

Taiwan’s tightened lending, probably aimed at Taipei’s luxury market, is unlikely to have much impact, Lim said.

Luxury Market

“The luxury market is less driven by debt financing and property is quite affordable outside Taipei, with less than 30 percent of household disposable income used to pay mortgages,” the analyst said.

Luxury apartments situated near Taipei 101, the world’s tallest completed building, are sold for the equivalent of $1,149 per square foot, Lim said. A 1,500-square-foot apartment in these properties will cost $1.7 million, compared with $625,050 for a similar home in Beijing, $2.6 million in Hong Kong and $2 million in Singapore, based on calculations from CB Richard Ellis’s data.

A rebound in domestic consumer confidence and homeowners wanting to upgrade will continue to boost the Taipei market, Lim said. In Taipei city alone, more than 70 percent of housing is more than 20 years old, so there will be a natural replacement cycle, he said.

China Ties

Lim says warmer relations with China will also boost the Taiwan residential property market.

“We expect more foreigners to buy properties if Taiwan opens up its economy more to China,” he said. “At the luxury end, properties in Taipei are still attractively priced compared with other Asian cities.”

Taiwan’s real estate market has been mainly driven by the domestic market, with foreigners making up 0.2 percent of property transactions, he said, citing government data.

Relations between Taiwan and China have improved since President Ma Ying-jeou took office in May 2008 and dropped the pro-independence stance of his predecessor, Chen Shui-bian. Closer ties with Taiwan’s biggest trading partner may help President Ma Ying-jeou hasten a recovery in the export-dependent economy, which shrank 7.54 percent in the second quarter.

To contact the reporter on this story: Weiyi Lim in Taipei at Wlim26@bloomberg.net

Last Updated: November 12, 2009 23:56 EST