Shares in major construction companies tumbled for the third consecutive day yesterday as the government’s tax reform plans cast another shadow over the property market, analysts said.
The sub-index for construction and building material shares shed another 1.62 percent yesterday, bucking the TAIEX’s 0.46 percent rebound, as it was weighed down by the government’s plans to tax vacant land and introduce property transaction disclosure rules, as well as other measures, as it seeks to lower property prices.
“Uncertainty about the government’s intentions has driven investors to dump construction shares, although the proposed reforms sound harmless,” said Stanley Su (蘇啟榮), head researcher of Sinyi Realty Co (信義房屋), the nation’s only listed broker.
President Ma Ying-jeou (馬英九) on Wednesday said his administration aims to push for legislation that would value land that is to be expropriated based on its market value rather than its government-assessed worth, as under current practices.
Ma has also vowed to impose a tax on vacant land and introduce measures to make property transactions more transparent and accountable.
Construction and building material shares have fallen 8.51 percent over the last three days amid growing unease that the government might take further moves to curb housing prices that remain unresponsive to the “luxury tax.”
“Many are worried the proposed disclosure requirement is intended for tax purposes, making real estate investments more expensive,” Su said.
However, the concern is unwarranted as the measure aims to ensure real-estate brokers file trading data so the government can better track property transactions and their fair value, Su said.
If passed into law, the measure will help suppress price manipulation on the part of land developers and construction firms as they possess more information than individual buyers, Su said.
However, the equity market had a different reading.
Shares of Shining Building Business Co (鄉林建設) dropped another 4.22 percent to NT$29.5 yesterday, while Kindom Construction Corp (冠德建設) and High Wealth Construction Co (興富發) fell 3.26 percent and 2.07 percent to NT$17.8 and NT$52 respectively, Taiwan Stock Exchange data showed. The firms closed near the daily 7 percent limit a day earlier.
In related news, housing transactions have plunged 18.82 percent so far this month from a year earlier, according to H&B Realty (住商不動產).
H&B Realty spokeswoman Jessica Hsu (徐佳馨) pinned the blame on political rhetoric that may become increasingly harsh ahead of January’s presidential election.
“The market will remain sluggish as both the ruling and opposition presidential candidates make housing justice their top campaign platform,” Hsu said.
Chang Ding-hsuen, finance professor at Jinwen University, who closely tracks the property sector, said the proposed reforms would benefit the housing market in the long run, although they may depress transactions in the short term.
“Unfortunately, reform efforts tend to come to naught once the election is over,” Chang said.