KBANK Private Banking (KPB) has highlighted three major trends in the Thai real estate market for the “new normal” era.
KPB says the government’s policy of not extending the land and building tax cut in 2022 is likely to encourage high net worth individuals to convert their land holdings into collateral and investment funds to seek higher returns. KPB has targeted a new investment land loan of up to 10-15 billion baht ($300-450 million) this year.
The government’s decision not to renew the 90% land and building tax reduction means that undeveloped land can no longer generate revenue streams to cover taxes or other related expenses, Korakoch Atthasakulchai noted, head of off-market solutions at KPB.
“Property owners or investors should study market trends carefully while looking for opportunities to enhance the potential of their land to generate attractive returns that could cover related expenses or even expand their existing assets,” he said. she stated.
As such, landowners and investors should watch for the following three trends – “new ways to use land in the era of the ‘new normal'”; “more opportunities in real estate investment”; and “a chance to convert the land into an investment fund to generate cash for the payment of property and building taxes.”
First, there are “new ways of using land in the era of the ‘new normal’. The Covid-19 pandemic has radically changed the way we lead our lives. Working from home has become increasingly popular and is expected to become a mainstream work choice in the future.
Given this, the number of people commuting to work in cities will decrease, which is bound to affect land use. For example, people are likely to prefer living in larger homes than a condominium; office spaces can get smaller; online shopping will replace malls; and consumers will also prefer ordering food to eat at home rather than eating out.
All of these factors will likely lead to lower land prices in city centers, while those on the outskirts of cities will likely increase. Besides location, another important factor is the potential of a piece of land, i.e. how it can be developed to meet the needs of consumers in today’s world.
Second, there are “more opportunities in real estate investing”. As Covid-19 brought an immediate liquidity crunch to many businesses or forced them to adjust their plans and strategies due to the new market environment, more assets than ever before, including properties, were put on sale at reasonable prices.
Prospective buyers may also have a better chance of owning the most sought-after properties in certain prime areas, although their prices may not drop in certain locations.
It is therefore a good time for investors who do not like the volatility of the capital market and wish to acquire additional properties. However, the potential tax burden should be kept in mind before deciding to invest in the real estate market.
Third, there is “a chance to convert the land into an investment fund to generate cash for the payment of property and building taxes.”
Since the land and building tax became an additional charge after the government canceled the 90% reduction, and the tax will probably be increased by 0.3% every three years depending on the increase from land assessment value, conversion of land into equity funds to seek returns for land tax payment through Land Loan for Investment is attracting 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 earn returns.
THE NATION (THAILAND)/ASIA NEWS NETWORK