Q1 results to spike on tax breaks

Property firms expect to generate high revenue and net profit in the first quarter, thanks to the rush by customers to complete transfer of residence ownership before yesterday’s original expiration date for the government’s tax incentives.

The government last week extended its reduction of land transfer and registration fees to 0.01 per cent until May 30. Property firms’ business-tax break was not extended, however, and returned to 3 per cent from 0.1 per cent yesterday.

According to a survey by The Nation last week, despite the extension of the incentives, most home-buyers went ahead with plans to transfer ownership before the original March 28 deadline.

Likewise, most property developers in recent months sped up construction and ownership-transfer plans as the date loomed. As a result, most will show improvements in their financial results for the first quarter of this year over the same period last year.

Asian Property Development senior vice president Visanu Suchatlumpong said the company sped up transfer of residential projects to customers, especially for its five Life condominium projects – Life @ Sukhumvit, Life @ Sukhumvit 67, Life @ Sathorn 10, Life @ Ratchada-Hwangkwang and Life @ Ratchada-Suthisarn. The projects are worth a combined Bt5.5 billion.

The two-month extension only covers the tax breaks for buyers and consumer sentiment toward buying residences should remain high through May, Visanu said.

Property Perfect CEO Chainid Ngowsirimanee said the company’s presales topped Bt2 billion in the first quarter – beating results for the same period last year. Total revenue growth will also exceed last year that thanks to the customer rush to transfer ownership.

Chainid agreed that the decision not to extend the special business-tax rate of 3.3 per cent for property developers would not have a significant impact on the market.

He added that most property developers would sell inventory and speed up new investments in residential projects in the next two months. The extension of incentives for buyers would keep the market active, saving home-buyers Bt30,000 for every Bt1 million of the cost of a residence, he said.

Kasikorn Research Centre said that prompted by the tax breaks, the number of property transactions had skyrocketed recently, overwhelming officials at the Lands Department. The backlog of applications was part of the reason for the deadline extension.

A flood of loan applications has been received at banks, exceeding their capacity to process them. Many home-buyers made hasty decisions on home purchases in order to qualify for tax breaks.

The research centre expected the property market would remain unusually active during the next two months until the fee reductions come to an end. The extension is expected to be quite helpful to property developers, especially amid the considerable rivalry in the market, where a larger housing supply is expected to develop in total projects and new housing completions, the centre said.

To cash in on the extension, developers are expected to stage a number of marketing campaigns to sell off their unsold units. The move will also help boost sales by attracting reluctant home-buyers who will now have more time to make a choice that meets their needs. It will help ease cost burdens for potential buyers, especially those with low to medium incomes.

Meanwhile, financial institutions will also benefit from the extension, as it will allow them greater time to scrutinise loan applications and thus ensure quality loan approvals, the centre said.

Demand for housing units is therefore expected to be high during the first half of 2010. Thereafter, the real-estate market in the second half this year may experience slower sales turnover. Developers should thus adjust their marketing strategies to brace for new challenges to their business operations later on, the centre said.