Property stocks jumped on Wednesday after the Ministry of the Interior (MOI) announced measures to provide participants in future urban renewal projects with housing tax breaks, dealers said.
However, the gains posted by the property sector could prove short-lived as the local housing market remains plagued by low transactions and many home buyers expect prices to continue to trend lower, they said.
The property sector closed up 3.06 percent at 244.83 on the Taiwan Stock Exchange on Wednesday, when the weighted index ended up 0.53 percent, at 9,240.71. With large-cap electronics stocks moving in a narrow range, the property sector served as an anchor to stabilize the broader market, dealers said.
Among rising property stocks, Farglory Land Development Co.(??) rose 2.20 percent to close at NT$37.50 and Huaku Development Co. (??) gained 2.07 percent to end at NT$59.20.
In addition, Cathay Real Estate Development Co. added 10 percent, the maximum daily increase, to close at NT$18.60, and Kindom Construction Co. (??) rose 8.36 percent to end at NT$20.10.
"Property stocks were moved largely by the preferential housing tax plan proposed by the MOI as investors have high hopes that the tax break will encourage existing home owners to participate in urban renewal projects," Hua Nan Securities analyst Henry Miao said.
On Tuesday, the Ministry of the Interior proposed a preferential housing tax for home owners who participate in urban renewal projects, after President Tasi Ing-wen (???) instructed the Cabinet to speed up the implementation of such projects.
Currently, about 3.7 million home owners live in homes that are 30-years old or more. The government aims to use urban renewal projects to build new buildings in a bid to ensure the safety of residences.
Under the MOI plan, home owners who participate in urban renewal projects and do not sell their new homes will be entitled to a 50 percent cut in housing tax. If home owners dispose of the new property, buyers will not be eligible for the tax break, the proposal indicated.
At present, the preferential tax will be available to urban renewal participants for only two years after the completion of the project.
However, Executive Yuan spokesman Hsu Kuo-yung (???) declined to comment on the proposal, saying it has not yet been finalized.
In addition to the housing tax break, the MOI has also proposed a revision to the Urban Renewal Act that will adjust existing floor area ratios, which refers to the ratio of a building's total floor area (gross floor area) to the size of the plot of land on which it is built, in a bid to encourage wider participation in urban renewal.
The ministry said the amendment to the Urban Renewal Act is likely to be submitted to the Legislature Yuan in the next session, which kicks off after the Lunar New Year holiday in February.
"I am not upbeat about urban renewal in Taiwan because it is difficult to get consent from existing home owners. Without agreement, the speed at which urban renewal progresses will remain slow," Miao said.
"Despite the gains posted by the property sector right now, I am afraid that the upturn will be temporary since the local property market remains weak,"the analyst said. "Many home buyers are reluctant to enter the market as they expecting housing prices to continue to fall."
Source: Focus Taiwan News Channel