The construction sector yesterday received boost in the wake of the Ministry of Finance’s proposal on Thursday to tax property sellers on the actual sales amount rather than the government-assessed value, dealers said.
Buying yesterday morning also reflected strong bargain hunting after many property stocks had encountered pressure in recent sessions amid uncertainty over the government’s tax reform, dealers said.
The construction sub-index climbed 6.71 percent to 290.13 points, while the TAIEX edged 0.35 percent higher to close at 9,529.51.
Kindom Construction Corp (京城建設) rose 2.09 percent to NT$26.85, Huang Hsiang Construction Corp (皇翔) soared 4.7 percent to NT$46.75 and Highwealth Construction Corp (興富發) gained 2.62 percent to NT$66.6.
“The new tax reform proposal removed the uncertainty that had been plaguing the construction sector in recent sessions,” KGI Securities (凱基證券) analyst Phil Chu said.
“Estimating minimal impact on the property market as a result of the new tax scheme, investors rushed to pick up property stocks soon after the local bourse opened,” Chu said.
The ministry told a news conference on Thursday that home sellers would be subject to a tax rate of 17 percent on their profit if they sell a property after having owned it for more than two years.
If they have held it for less than two years, the tax rate on the profit will be 30 percent, it said.
The ministry had been planning to tax all home buyers on a progressive rate of up to 45 percent, but changed its mind.
It has also suggested a threshold of NT$40 million (US$1.27 million) for the new capital gains tax in the property market, instead of the NT$20 million it proposed earlier.
Moreover, only property sold after Jan. 1 next year will be subject to the new capital gains tax, the ministry said.
“It means that only about 1 percent of property transactions will be affected by the new tax,” Chu said. “The strong buying in property stocks today, therefore, was no surprise.”
He said he favors Kindom among other property stocks, because it is a fundamentally sound firm.
“Kindom is expected to benefit from the launch of new property projects this year,” Chu said. “Since its share price fell from a recent mid-session high of around NT$37 in February 2014, the stock has been looking very attractive.”
Kindom posted NT$2.77 in earnings per share for the first nine months of last year, up from NT$0.77 in the same period of 2013.
Property agencies have estimated transactions involving homes, shops, and offices will grow by an annual 10 percent this year, now that the uncertainty in the market has lifted.
Transactions of residential and commercial property fell to 320,598 units last year from 371,892 in 2013.
Last year’s figure was the lowest since the 320,285 units reached in 2002.
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