Thailand will not renew its real estate tax breaks after they expire at the end of March, as developers are returning to normal profit levels and the economy is recovering.
According to officials, the incentives, including a cut in the mortgage registration fee, a reduction in the real estate transfer fee and lower special business tax, helped boost property sales, which rose 7 percent last year.
However, developers warned that they will have to pass on the additional costs to buyers, which will result in price increases starting in April.
The changes mean that the current 0.01 percent transfer tax will return to two percent. Certain vendors, which include real estate developers, will have to pay a 3.3 percent specific business tax, up from 0.11 percent, and a one percent mortgage registration, up from 0.01 percent.
These taxes will have an effect on completed properties, so the announcement will provide incentive for developers with unsold completed inventory to sell and transfer before the expiry date.
Off plan launches are not expected to be significantly affected, but the tax charges will have an impact on developers’ profit margins, as they pay for the specific business tax.
Several developers may increase prices to offset extra taxes, but the number of competing projects slated to be launched this year may keep prices for the same products in similar locations at roughly the same levels.
The increase in mortgage registration means that once special introductory interest deals expire, it will be more expensive for borrowers to switch lenders.
Land & Houses, the biggest home builder in Thailand, said it will raise its prices in April to take into account the higher tax charges. It added that it expects to report only single digit growth in its 2010 net profit due to the higher costs.