Three big changes in Thai real estate to look out for
KBANK Private Banking (KPB) has highlighted three major trends in Thailand’s real estate market for the “new normal” era.
KPB says the government’s policy not to extend the land and building tax cut in 2022 will likely prompt high net worth individuals to convert their land holdings into collateral and investment funds to chase higher returns. KPB has targeted a new Land Loan for Investment of up to 10-15 billion baht ($300-450 million) this year.
The government’s decision not to renew the 90 per cent cut in the land and building tax means undeveloped land can no longer generate revenue streams to cover tax or other related expenses, KPB’s chief of noncapital market solutions Korakoch Atthasakulchai noted.
“Landlords or real estate investors should carefully study market trends while seeking opportunities to enhance their land’s potential to generate attractive returns that could cover related expenses or even grow their existing assets,” she said.
As such, landowners and investors should watch the following three trends – “new ways of using land during the ‘new normal’ era”; “more opportunities in property investment”; and “a chance to convert the land into investment funds in order to generate cash for land and building tax payment”.
First, there’s “new ways of using land during the ‘new normal’ era”. The Covid-19 pandemic has drastically changed the way we lead our lives. Workfrom-home has become increasingly popular, and it is expected to be a mainstream work choice in the future.
Given this, the number of people travelling to work in cities will decline, and this is bound to affect land utilisation.
For instance, people will likely prefer to live in homes that are more spacious than a condominium unit; office spaces may become smaller; online shopping will replace shopping malls; and consumers will also prefer to order food to eat at home rather than dining out.
All of these factors will likely cause land prices in downtown areas to decline, while those in the outskirts of cities will likely increase. Aside from the location, another important factor is the potential of a plot of land, that is, how it can be developed to meet the needs of consumers in today’s world.
Second, there’s “more opportunities in property investment”. As Covid-19 has brought an immediate liquidity crunch to many businesses or forced them to adjust plans and strategies due to the new market environment, more assets than ever before, including properties, have been put up for sale at reasonable prices.
Prospective buyers may also have a greater chance of owning the most sought-after properties in some prime areas, although their prices may not decline in certain locations.
Therefore, this is a good time for investors who dislike volatility in the capital market and want to collect additional properties. However, one must bear in mind the potential tax burden before deciding to invest in the property market.
Third, there’s “a chance to convert the land into investment funds in order to generate cash for land and building tax payment”.
As the land and building tax has become an additional burden after the government rescinded the 90-per cent reduction, and as the tax will likely be hiked by 0.3 per cent every three years in line with the increase in land appraisal value, converting land into capital funds in order to seek returns for land tax payment via Land Loan for Investment is gaining interest from high net worth individual clients.
KPB said Land Loan for Investment is the conversion of land into collateral, and in return, clients receive an investment credit limit for an opportunity to gain returns.