Construction stocks down slightly on housing tax hike
Central News Agency
2014-05-21 11:52 AM
Taipei, May 21 (CNA) Shares in the construction sector moved slightly lower Wednesday morning, a day after the Legislative Yuan passed an amendment to raise taxes for non-owner-occupied homes. The losses were limited because construction stocks had trended lower to digest the impact of negative tax hike factors in mid-April, dealers said. As of 11:10 a.m., the construction sub-index had fallen 0.09 percent to 293.60 points. The weighted index of the Taiwan Stock Exchange was up 0.15 percent at 8,900.72 points. Among major property developers, shares of Farglory Land Development Co. fell 0.80 percent to NT$49.50 (US$1.64), while Kindom Construction Corp. lost 0.79 percent to NT$31.40, and Highwealth Construction Corp. bucked the trend to gain 0.15 percent, rising to NT$68.80. "I doubt that the increase in the non-owner-occupied property tax will have any adverse impact on the housing market as the new measures appear lenient to the rich," Hua Nan Securities analyst Henry Miao said. The revised tax rules, aimed at discouraging home "hoarding," raise the rate for non-owner-occupied residences to between 1.5 and 3.6 percent from the current 1.2-2 percent. However, the new law allows home owners to have up to three owner-occupied homes, meaning that only their fourth home and beyond will face the new tax hike. The tax hike is scheduled to take effect in July. "I do not think many people have enough financial strength to own four homes or more," Miao said. "To the rich who will be affected by the amendment, the hikes in the housing tax will simply be a drop in the bucket." "With the seven-in-one (local) elections scheduled for late this year, what the government can do is make the average citizen, long irritated with rising housing prices, feel comforted to some extent. But the new measures are unlikely to make a dent in the local property market," Miao said. Although the construction sector remained resilient after the tax change, Miao said, property stocks are not a good long-term investment for the time being as the U.S. Federal Reserve is cutting back its monthly bond-buying program and is expected to raise its key interest rates next year. "The property markets in the region have been largely boosted by ample liquidity caused by the Fed's quantitative easing to save the economy. Once liquidity begins to fade, property stocks in equity markets, including Taiwan, will suffer a major pullback," Miao said. "In addition, China has been gearing up to cap its already high home prices, which could hurt the sentiment of investors in the region," Miao said. Miao said he suggested investors buy local property stocks only for trading purposes for the moment. (By Frances Huang)
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