Doubts over effect of Thai govt stimulus

[webfact]

Doubts over effect of govt stimulus
BUSINESS REPORTERS
THE NATION



BANGKOK: -- PROPERTY firms expect to reap windfalls from the government's new measures for the real-estate sector, while economists have cast doubt over the overall effectiveness of the programme in boosting the economy.

Developers are happy that their customers will benefit from the measures that reduce transfer and mortgage registration fees and allow first-home buyers to deduct property purchases from their taxable income for a five-year period.

This is expected to encourage buyers to complete their purchases, thus helping to absorb a residential-property inventory valued at more than Bt45 billion.

Meanwhile, buyers of residential units in Bangkok and peripheral provinces due to be transferred to customers in the current quarter - estimated by the Thai Condominium Association to be valued at about Bt120 billion - will also benefit.

Pruksa Real Estate's managing director for condominiums, Prasert Taedullayasatit, said the company's inventory was currently worth Bt25 billion.

"Buyers of these units will benefit from the measures," he said.

Meanwhile, at Ananda Develop-ment, the inventory is worth around Bt3 billion.

"Thanks to the measures, our sales should rise in the next six months," said chief executive officer Chanond Ruangkritya.

According to a survey by The Nation, until next April 30, when the fee reductions expire, the number of units that Sansiri will be able to sell and transfer to customers is worth Bt9 billion.

AP (Thailand) sits on 1,750 units of inventory worth Bt4.34 billion, LPN Development's inventory of 6,000 units is valued at Bt8.8 billion, and Supalai's stock is worth Bt4.6 billion - all of which should also benefit from the programme.

Under the measures, until April 30 next year, home-buyers will pay only Bt200 in transfer and mortgage fees for every Bt1 million, saving Bt29,800, Pruksa's Prasert estimates.

Nevertheless, economists have cast doubt over the effectiveness of the measures, which they believe are unlikely to spur new demand.

In a research note, Tisco Securities said the measures would spur short-term speculation rather than help low-income earners, as intended by the government.

It noted that sales would rise, as the measures would make it easier for potential buyers to close deals, and low-income earners would benefit from the anticipated cut in transfer and mortgage-registration fees.

However, tax rebates are likely to boost short-term investment among upper-middle-income earners, rather than helping low-income earners, according to the securities house.

Tisco Securities estimates that to buy a Bt3-million residential unit, the buyer should earn at least Bt60,000 a month and, with that level of income, he or she could not be deemed a low-income earner.

Subject to the 15-per-cent income-tax bracket, low-income earners would save tax expenses to the tune of Bt12,000 a year, while higher-income earners, if making use of the tax measures, could save up to Bt36,000 a year on their tax bill.

Under the government's package, buyers can deduct 20 per cent of the purchase value from taxable income.

Meanwhile, Siam Commercial Bank's Economic Intelligence Centre (EIC) agrees that while the measures will speed up the decision process of home-buyers, they are unlikely to entice many new purchasers.

The measures are expected to help absorb the supply of units priced below Bt3 million. Of some 150,000 condominium units launched during 2013 and 2014, 70 per cent were priced below Bt3 million, it said.

Of a total of 32,000 detached houses and townhouses put on the market this year, about 67 per cent are priced below this figure.

While the EIC expects the measures to boost short-term demand, it does not expect them to boost the industry fully, as house purchases depend mainly on purchasing power and confidence.

While Kasikorn Research Centre expects the measures to allow lower-middle-income earners to gain easier access to home loans, the EIC doubts whether banks will relax lending restrictions in light of the high level of household debt.

"It is worth noting that household debt may rise due to the measures, which will boost the economy in the short term and help people to get their first homes. Long-term impacts on higher household debt should be monitored," said the Siam Commercial Bank unit.

KResearch expects the transfer of 35,900 residential units in the current quarter, an 11.2-per-cent increase from the same period last year.

The transfer rate dropped by 8 per cent year on year in the first nine months, to 76,500 units.

The property-sector measures follow a government stimulus package worth more than Bt120 billion aimed at boosting jobs and providing an improved loan-guarantee programme for small companies.

Source: http://www.nationmultimedia.com/business/Doubts-over-effect-of-govt-stimulus-30270915.html


-- The Nation 2015-10-15

[trogers]

Seems the developers are breathing a sigh of relieve and hope these stimulating measures would help them clear their huge stock...

But, the higher demand needs the financial means to be effective!

Edited October 14, 2015 by trogers

[yellowboat]

There is over supply and foreigners would have to be out of their mind to buy anything in Thailand. It is just a lousy investment.

[Emster23]

This inspired me to come up with plan to make myself a wealthy man. I'll write a check to myself for one million dollars! That ought to work.

[gandalf12]

This inspired me to come up with plan to make myself a wealthy man. I'll write a check to myself for one million dollars! That ought to work.

Dont be cheap, treat yourself and make it $5000000 after all who can live on just $1000000

[Orac]

A stroke of genius from the government. Got to admire them for their blue sky thinking here coming up with this ingenious plan to help first time buyers of major asset by effectively giving them a discount/rebate based on the govt accepting reduced tax revenues.

Also kudos to them for targeting people who probably couldn't afford to buy such an asset having taken into consideration the favourable conditions of Thailands private debt/gdp ratio and drawing on the experiences of other countries in pushing such sub-prime mortgages.

[sawadee1947]

that do you expect when soldiers try to improve economy...?

[Srikcir]

"It is worth noting that household debt may rise due to the measures, which will boost the economy in the short term and help people to get their first homes."

A populist strategy that originated with the PTP, condemned by the military rulers and now sponsored by the military. These new economic policies have become "do-do."

That is, "do as I say and not as I don't."

[mojorison]

Have to agree. I looked at it. Thought hard. Looked at it again, and I was not aroused one bit.

[elgordo38]

A stroke of genius from the government. Got to admire them for their blue sky thinking here coming up with this ingenious plan to help first time buyers of major asset by effectively giving them a discount/rebate based on the govt accepting reduced tax revenues.

Also kudos to them for targeting people who probably couldn't afford to buy such an asset having taken into consideration the favourable conditions of Thailands private debt/gdp ratio and drawing on the experiences of other countries in pushing such sub-prime mortgages.

Just another carrot and stick approach to herd over indebted people to run to their local bank and try for a loan they know they cannot pay back.

[coulson]

So basically, those with the cash get to save 29,800, and those who still cannot get it from their bank will suffer as it is another reason to just keep the market prices up!?

The only 'stimulus' in this incentive is the rich who continue to flick their beans.

[NCFC]

A stroke of genius from the government. Got to admire them for their blue sky thinking here coming up with this ingenious plan to help first time buyers of major asset by effectively giving them a discount/rebate based on the govt accepting reduced tax revenues.

Also kudos to them for targeting people who probably couldn't afford to buy such an asset having taken into consideration the favourable conditions of Thailands private debt/gdp ratio and drawing on the experiences of other countries in pushing such sub-prime mortgages.

Yeah. Do you reckon they will now extend this to first time car purchases? Oh wait a minute....

Now had this happened during Yinglucks tenure certain people on this board would be in meltdown about Thais taking on debt that they can't afford. Blah blah blah. But it's only a populistic gimmick depending on who's doingit, I suppose.