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Taiwan Store Prices May Halt Gains as Rates Climb

(Corrects prices in second paragraph.)

Taiwan’s street-side store property prices may fall, halting three years of gains, because of higher interest rates and a new tax, according to the island’s biggest real estate brokerage.

Prices of stores in Taiwan’s metropolitan areas averaged NT$25.3 million ($883,133) each in the first four months this year, 1.6 percent lower than the NT$25.7 million average price last year, according to data from Sinyi Realty Co. (9940) The island’s store prices rose for three consecutive years to 2010.

Taiwan’s central bank raised borrowing costs for the fourth straight quarter in March to prevent inflation. The cabinet said this month a new property and luxury tax will take effect from June 1. A 15 percent levy will apply to commercial and residential investment properties sold within a year of purchase and 10 percent for those sold within two years, according to the Ministry of Finance.

“Rising interest rates are curbing store prices,” Stanley Su, Taipei-based chief analyst at Sinyi Realty, said in a telephone interview yesterday. The rental yield for these properties averages about 2.5 percent, and the return may lose allure as interest rates increase, he said.

The central bank raised the discount rate on 10-day loans to banks by 0.125 percentage point to 1.75 percent, the monetary authority in Taipei said March 31.

The government last month raised its 2011 inflation forecast to 2.18 percent from 2 percent and increased the gross domestic product growth forecast for the year to 5.04 percent from 4.92 percent.

To contact the reporter on the story: Yu-huay Sun in Taipei at ysun7@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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