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Thailand calls time on property tax breaks

01peninsulaThailand’s property executives have complained – but they would be more convincing if they hadn’t also predicted that housing prices could rise 8% after tax breaks designed to prime the Thai real estate market are withdrawn.

Ending several weeks of uncertainty – including emphatic declarations from industry professionals that tax incentives would continue – Thailand’s cabinet has finally ruled that tax cuts for property buyers will end as initially planned on 28 March.

The reductions in transfer fees, mortgage fees and special business tax have been in place since 2008 and have meant a saving of up to 5% for purchasers, although some of the savings have definitely gone into the pockets of developers.

The tax breaks cut transfer fees to 0.01% from 2%, mortgage fees to 0.01% from 1% and special business tax to 0.1% from 3.3%.

Now, though, the Thai government has ruled that the property industry no longer deserves special treatment. In fact, listed property firms saw the highest profits among eight industrial sectors, Finance Minister Korn Chatikavanij told the Bangkok Post.

A flurry of purchases is expected in the wake of the cabinet’s decision. Real estate developer SC Asset plans to shift 120 units worth 600 million baht before the incentives end.

‘We will remind customers that they should use the privileges before they expire,’ said chief operating officer Kree Dejchai. ‘They can save up to 100,000 baht for a 5-million-baht unit.’

But the end of the tax breaks is forecast to hike real estate prices in the longer term.

Atip Bijanonda, president of the Thai Condominium Association, has told the Bangkok Post that ending the tax privileges will automatically push up prices by 4.2% – but could contribute to a more substantial appreciation by the year-end.

In his view, rising oil prices, inflation and interest rates could increase prices by 5% to 8% over 2010.

Read the story in the Bangkok Post here.

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