Bangkok Post : Property perks to end

Housing prices are forecast to rise by at least 4% starting in April after the government announced the end to a package of tax incentives for homebuyers.

Cabinet ministers yesterday declined to extend tax breaks set to expire on March 28, which include temporary cuts in transfer fees to 0.01% from 2%, in mortgage fees to 0.01% from 1% and in special business tax to 0.1% from 3.3%.

The government will also allow to expire a programme subsidising water bills, but agreed to extend until June a programme waiving electricity charges for up to 90 units per month for households. Free bus rides and third-class train fares will also be continued until June, with the total cost of the subsidies projected at 4.5 billion baht.

The property tax breaks were first launched in 2008 under the Samak Sundaravej government, and were later extended by the Somchai Wongsawat government. The public utility and mass-transit subsidies were launched by the Samak government and extended by the Abhisit Vejjajiva government because of the severe economic slump.

Mr Abhisit said yesterday that with the economy now clearly on the road to recovery, it was proper to review the stimulus measures.

But property executives said that allowing the breaks to expire would hurt the industry and the economy. Atip Bijanonda, president of the Thai Condominium Association, said the property sector, which employs 2 million people, had not fully recovered.

"Today the sector is moving sideways. It's not hard to push forward, but if we have to move uphill, it will be exhausting," he said.

Mr Atip said the end of incentives would add 4.2% to home prices but rising oil prices, inflation and interest rates could mean prices would rise by 5% to 8% this year.

Issara Boonyoung, president of the Housing Business Association, said property-related transactions this year would drop below the 220,000 posted in 2009. The government should now consider revising details of its planned building and land tax act, he said.

Kree Dejchai, chief operating officer of SC Asset, said the developer planned to clear an inventory of 120 units worth 600 million baht before the incentives end.

"We will remind customers that they should use the privileges before they expire," he said. "They can save up to 100,000 baht for a 5-million-baht unit."

But Finance Minister Korn Chatikavanij noted yesterday to the cabinet that the listed property industry saw the highest profit among eight industrial sectors, particularly those developing condos priced above 3 million baht.

Ekniti Nitithanprapat, a spokesman for the Finance Ministry, said an improving economy reduced the need for stimulus measures. "You shouldn't say this is the start of the government's 'exit strategy'. Only that the government is cutting short-term measures that are no longer necessary," he said.

Teerana Bhongmakapat, dean of economics at Chulalongkorn University, said it was right not to extend the measures, which were adopted to ease living expenses for low-income households when global oil cost almost double its current price and inflation was a major concern.

Vorapol Socatiyanurak, the vice-chairman of the National Economic and Social Advisory Council, said the government faced increased pressure in maximising the use of funds to help the economy.

Current expenditures, primarily civil service salaries, account for nearly 80% of the total budget, with only 16% going to new investment.

Dr Vorapol said that with rising public debt, deficit spending would be sustainable for only a few years.

Relate Search: Abhisit Vejjajiva, Somchai Wongsawat, Thai Condominium Association, Atip Bijanonda