House Market Seen Growing 15%

[george]

House market seen growing 15%

Tax perk cuts dent sales in first half

BANGKOK: The housing market is projected to grow by 15% in 2004 even though some property tax incentives are likely to expire by the end of this year, according to prominent real estate figures.

Housing expansion, especially in Greater Bangkok, will move hand in hand with the economy which is expected to expand by 6-8% next year, said Prasong Owlarn, president of the Housing Business Association.

``In my opinion, the housing boom will slow down in the first half of next year due mainly to the expiry of tax breaks. However, it could still grow around 10%,'' he said.

Currently, property transfer and mortgage registration fees are at 0.01%, down from 2% and 1%, respectively, and the specific business tax is 0.11%, down from 3.3%.

The Finance Ministry announced plans this month to end the low tax rates on Dec 31, in the view that the sector was strong enough with the number of newly launched residential projects rising throughout the year. The status of the fees is still not clear.

Mr Prasong forecast that the housing market would readjust in terms of demand and supply for a certain period and then would grow more in the second half of next year, offsetting the decline in growth in the first half.

The number of registrations for houses in Greater Bangkok is predicted to be around 50,000 to 55,000 units next year, up from 44,000 units forecast for this year. Housing demand is estimated at around 80,000 units.

``New housing projects in Bangkok will vary and price competition will get tougher with more small developers entering the market,'' Mr Prasong added.

Chokchai Banluthangtham, president of the Thai Real Estate Association, said the restoration of the 3.3% specific business tax would result in developers shouldering additional costs.

``A number of developers will pass on the extra financial burdens to buyers by increasing prices but some giant developers will use this situation to boost sales by maintaining prices,'' he said.

It has been reported that market leader Land & Houses Plc will soon launch an aggressive campaign to freeze its housing prices during the first quarter of next year.

Atip Pichanont, deputy managing director of developer Supalai Plc, said made-to-order houses would play a bigger role next year as consumers were more confident in developers' reputations and the supply of brand-new units was insufficient.

As for interest rates, Mr Chokchai said they were likely to hold steady for the next six months and then increase slightly in the latter part of next year. The effects would be minimal if the rates rise between one and two percentage points and homebuyers would not need to adjust their monthly instalment payments.

``I don't think the [removal] of tax incentives will make the market decline. Those who want to buy a house will still buy one even though taxes are higher,'' he said.

But banks will be more careful in extending loans to finance property projects. Those who buy premium houses costing from 10 million baht will face a mortgage limit at 70% of the price.

Mr Chokchai said the property boom next year would not be limited to Bangkok, as some major tourist destinations would see more new property developments related to tourism.

--Bangkok Post 2003-12-24