The homebuilding market is expected to recover in the second half as the looming land and buildings tax helps stimulate demand before coming into force next year.
Economic sentiment is also improving thanks to the launch of megaprojects and low interest rates and oil prices, said Pichit Arunepunlop, president of the Home Builder Association (HBA). According to Mr Pichit, the land and buildings tax would prompt those who purchased land for self-building to kick off construction in the second half to avoid seeing their plots taxed under the new act. The cabinet approved the long-awaited tax in June, which is designed to expand the national taxpayer base.
The bill, which takes effect next year, sets ceiling rates of 0.2% of the appraisal value for land used for agricultural purposes, 0.5% for residences, 2% for commercial use and 5% for vacant or undeveloped land. The tax will be levied on primary homes and land used for agricultural purposes with appraisal prices starting at 50 million THB. The rate will be applied to the amount exceeding 50 million THB.
Owners of primary homes and farms with an appraisal price below 50 million THB will be exempt from the tax. The tax will also apply to second homes on a progressive basis, with rates of 0.03% to 0.30% for homes whose appraisal values range anywhere from under 5 million THB to over 100 million. For vacant or undeveloped land, the tax rate will be imposed at 1% for 1-3 years, 2% for 4-6 years and 3% for more than seven years. “The act will compel not only those who have delayed their decision to self-build, but also those who own land for selling purposes. This will help boost the quantity of land supply on the market,” said Mr Pichit.
At the same time, purchasing power for people in the agricultural sector should pick up as the drought-related conditions have alleviated, he added. Low interest rates and oil prices would further help offset home construction costs. The HBA expects the value of the homebuilding market to total 7.2 billion THB in the second half, up from 6 billion in the same period last year. In the first half, it totalled 4.8 billion THB, up from 3.5 billion in the same period last year. In a move to boost demand in the second half, the HBA held the Home Builder Expo 2016 from Aug 18-21 at Queen Sirikit National Convention Center, which is projected to generate 3.2 billion THB. “The self-built home market represents real demand where [the land buyer] is well prepared before making a decision,” Mr Pichit added.