The Government of Thailand embarked on a tax-scheme meant to stimulate the housing market, by offering a maximum tax deduction of 10% for first-time home owners on houses costing up to 5 million baht

The Government of Thailand has recently embarked on a tax-scheme meant to stimulate the housing market, by offering a maximum tax deduction of 10% for first-time home owners on houses costing up to 5 million baht. This tax scheme has resulted in mixed reaction by the public, who are yet to recover from the effects of property cooling measures adopted by the Government during the earlier part of the year.

Due to fears that rising activity in the housing market could lead to a supply bubble formation, the Thai Government undertook to arrest this possibility by increasing land supply, imposing market curbs, lowering loan-to-value ratios on second mortgages, raising the sellers stamp duty and other additional property taxes. But later in the year, the Government decided to counteract this measure by imposing tax cuts to first time home owners. Despite this measure, new buyers are yet to come into the market and current figures actually show a decline in the uptake of condominiums in the market.

According to Colliers International Thailand, a real estate property consultant in Thailand, its latest research shows 3,000 units were launched in the third quarter of 2011, which is a remarkable decline as compared to the 11,600 units launched in the second quarter of 2011. Current incentives favor properties already under construction, which can be completed by the end of 2012. Most developers find this time frame challenging, especially for newly launched condominiums. Also some people argue that the main beneficiaries of the scheme are likely to be high and middle income earners. These factors led to a wait and see approach, according to Tony Picon, Associate director of research at Colliers.

According to Surachet Kongcheep, senior manager for research, current statistics show a steady rise in the number of units for the next quarter, with 5,700 units slated to be completed in the fourth quarter of 2011. Mr. Kongcheep also noted that there is a steady increase in the number of high-rise construction permits, prior to launching. This seems to indicate that developers are preparing for a surge in new launches once the market is clear on how the incentive program works. A total of 25,700 units are scheduled to be completed in the last quarter of 2011, with the Northern Fringe area expected to continue to dominate supply in Urban Bangkok, for the early part of the decade.