Property companies and contractors are pleased with the government's generous incentives for the sector but are concerned these will not be enough to spur purchases if home-buyers remain uncertain about job security.
The Cabinet yesterday allowed home-buyers to deduct up to Bt300,000 of the principal and up to Bt100,000 of mortgage payments each year from their taxable income.
Asian Property Development CEO Anuphong Assavabhokhin said that would boost purchasing power, because home-buyers were entitled to immediate discounts. Coupled with cuts in mortgage registration and transaction fees, home prices will automatically be 5-10 per cent lower.
"Still, without job security they won't buy houses, because that's a long-term investment," he said.
Thai Contractors Association president Polpat Karnasuta said the measure would benefit mainly upper middle-income earners buying residential units priced between Bt3 million and Bt5 million. He said this would benefit both the property market and construction companies but that if consumers' income as a whole did not improve, it would not help boost demand very much.
Areeya Property chairman and CEO Wisit Laohapoonrungsee said it would take a while to determine whether the government's measure was working.
"The deduction amounts are sufficiently high," he said.
However, a big obstacle for the market right now is commercial banks' strict lending guidelines. Wisit said many home-buyers could not receive bank-loan approval, due partly to the stricter lending requirements and partly to their credit record.
In an open letter to Prime Minister Abhisit Vejjajiva, Thai Appraisal Foundation chairman Sopon Pornchokchai said the measure would encourage home purchases among those who could not afford purchases at the moment, which could lead to problems in the future.
"If the economy continues to sink, the purchase will post financial risks to buyers in this group. Once their income is affected, they cannot pay instalments, and this will be a long-term problem," he said.
Sopon urged the government to focus on incentives instead, in order to spur sales of second-hand homes. He said if it became easier for the homes to change hands, the public could enjoy a 10-30 per cent discount.
He said the government should also fully enforce the Escrow Act as a long-term policy to boost confidence among home-buyers in the long term. If buyers see their down payments are fully protected, they will have greater confidence about buying a unit in any project. The government should also improve dissemination of housing prices and measures to control professionals involved with the property industry.