Property plays fall on tax concerns

Source : Straits Times – 14 Jul 2009

A PROPOSED tax change designed to make the rules clearer on profits made from the sale of property was still creating a stir yesterday about a week after news of it first broke.

Even though the Government has clarified that the proposal is not intended to stifle speculation, traders are still concerned that it might have a detrimental impact on the property sector.

Under the proposed change, an individual will escape tax on gains made from selling a property if he has not sold any other property over the preceding four years.

But there remain lingering fears among analysts that home buyers might interpret it negatively, despite government assurances that there are no plans to change the tax treatment of individuals selling more than one property within a four-year period.

Market watchers spent the weekend carefully gauging the mood at showflats. And, going by the carnival atmosphere witnessed by many, some analysts have concluded that sentiment remains positive – especially for condos targeted at mid-range buyers and HDB upgraders.

This positivity, however, has not allayed concern that the planned tax change – set to become law in January – may well dent the top-end of the residential market, where condos are invariably bought for investment purposes.

So it was not surprising to find property counters caught in a fierce tug-of-war between the bulls and bears as the tax-change debate continued to rage.

Among the property sector’s big losers of the day were City Developments which fell 20 cents to $8, CapitaLand which lost eight cents to $3.31, United Overseas Land which slipped nine cents to $3.21, and Wing Tai Holdings which was down four cents at $1.23.

Elsewhere, local banks were hit by selling activity as investors looked forward with some apprehension to United States lenders, such as Citigroup and JPMorgan Chase, reporting their quarterly earnings later this week.

DBS Group Holdings fell 22 cents to $11.42, United Overseas Bank lost 16 cents to $14.42, and OCBC Bank was down 20 cents at $6.86.

Given somewhat reduced investor appetites, even the telcos – which were being snapped up last week because of their high dividend yields – came under selling pressure. SingTel lost four cents to $3.12 and StarHub fell six cents to $2.13.

The general sell-off caused the benchmark Straits Times Index to plummet 41.34 points, or 1.8 per cent, to 2,266.64. Because of the lacklustre investor interest, only 1.05 billion shares worth $863.2 million changed hands.

Across the region, a general state of uncertainty saw both Hong Kong’s Hang Seng and Japan’s Nikkei-225 dropping about 2.6 per cent each.

Citigroup Investment Research noted in a report yesterday that funds investing in Asian markets suffered a net outflow of US$365 million (S$534 million) last week. Although trifling when compared to the second-quarter net inflow of US$13.2 billion, the outflow raised fears that it might signal the shape of things to come.