Taipei, Nov. 20, 2012 (CENS)--The Insurance Bureau, under the Financial Supervisory Commission (FSC), put forth yesterday (Nov. 19) seven major control measures for investments by insurance firms in realties, effective immediately, which may prompt insurance firms to withdraw from the realty market completely by the end of this year, according to market players.
The withdrawal of insurance firms from the market is expected to dampen domestic realty prices at large scale, as insurance firms have been major buyers of commercial properties. Even if insurance firms return to the realty market next year, their price-offer ability will be severely constricted by the required minimum yield rate of 2.875%.
In addition, there will be no insurance firms buying plots of land for constructing residences, as the Insurance Bureau regulates that insurance firms must complete constructions in five years after purchase of plots of land and cannot transfer their ownership in 10 years.
Meanwhile, insurance firms cannot purchase pre-sold houses or purchase properties before raising rentals to a level meeting the required minimum investment returns rate.
The Insurance Bureau pointed out that since insurance firms utilize public funds, their liabilities must correspond to their assets to assure stable management. As a result, the bureau resolved to strengthen the supervision and internal-control system for realty investments by insurance firms.
Insurance firms, however, can be exempt from the restriction on the purchase of land for investing in public infrastructure, according to the Insurance Bureau.
The seven new control measures, which will not be retroactive, include:
First, minimum investment yield rate will be raised by three basic points to 2.875%. Second, the requirement of minimum yield rate will be effective immediately, without a two-year grace period. Third, for investments in commercial properties, ownership cannot be transferred in five years. Fourth, for purchase of plot of land, construction work must be completed in five years and ownership cannot be transferred in 10 years. Fifth, except cases involving investment less than NT$300 million, realty investment projects must win the approval of the board of directors on a case-by-case basis. Sixth, for conversion of investment-oriented realty to own-use realty, ownership also cannot be transferred in five years. Seventh, investment in pre-sold houses is forbidden.
(by Philip Liu)
