Real Estate After The Termination Of Tax Benefits

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Special Report: Real Estate after the Termination of Tax Benefits

BANGKOK: -- The cabinet has recently halted tax benefits for the real estate sector as both the sector and economy seem to be recovering well. Property rights transfer fee and mortgage registration fee hence are increased from 0.01% to 2% and 1% respectively while special business tax is increased from 0.01% to 3% from 28 March 2010 onwards. The inevitable concern from this is the increase in property price.

Guest Lecturer of the Faculty of Architecture Associate Professor Manop Boonsadadt from Chulalongkorn University stated that the measures implemented by the government were very beneficial for both house developers and buyers alike. He explained that house buying could have multiple effects in boosting the economy as everything necessary from construction materials such as cement and steel, to furniture could enjoy the measures too.

Mr Manop admitted that there was no need to continue the measures at present because the economy was recovering well, and the government should let the business go on by its own mechanism. However, he said the government could step in to give assistance again if problems arose.

Regarding the future of the property market, the academic elaborated that Asia would become the center of economic growth, and the real estate business in many big cities in Asia would thrive. He however foresaw that Thailand might experience oversupply of real estate in the middle of this year, while stating that the Bank of Thailand and the government should regulate interest rate and inflation to control oversupply, similar to what the central bank of China did.

Mr Manop warned new property buyers not to buy real estate for speculation. He said people should not buy real estate just because the interest rate at that time was low; however, they should consider their actual demands and review their financial readiness from savings for a down payment to the monthly payments that will go into their property. Meanwhile, for real estate developers, he suggested them to seek mid-term profits instead of short-term ones.

Although the Thai real estate sector now is now deemed strong enough to stand by its own at present without support from the government, remarks made by the academic for fear of oversupply cannot be overlooked. Further supervision must be taken to ensure that the sector will grow well in line with the national economy and expansion of the industry in global level accordingly.

-- NNT 2010-03-23

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Comparisons with other regional markets is quite common but wholly irrelavant in this case. Hong Kong and Singpore for instance are both inherently open to foreign investors with financing and far fewer limitations on entry.

I assume that this article refers exclusively to the local market (local developer to local buyer), therefore with almost no relevance to Pattaya, Phuket etc, or even the premium level in Bangkok.

If as suggested the the local market faces an oversupply by mid-year and this may lead to a slow down etc, then this would be a very serious issue as local developers are currently reporting very strong numbers, unlike Pattaya, Phuket and the premium level in Bangkok.

Without any doubt though these incentives have stimulated sales transfers in 2010. Sad to see them go, some sort of phasing back to full rates would have helped as well, rather than a full return.