The Thai government has released a housing stimulus measure which grants personal income tax allowance for buyers of first homes worth up to 5 million baht during April 30-December 31, 2019.
This measure will help reduce housing costs based on the personal income tax rate of each purchaser.
Although houses with the prices under 5 million baht are account for about 80% of the residential properties in the market today, EIC expects the benefits from this measure to be rather insignificant as
(1) the stimulus is limited to the first home buyers,
(2) the latest tax privilege being granted has lower degree and shorter runtime than the measures in the past,
(3) housing loans from financial institutions are becoming more strict especially with the new LTV criteria, and
(4) the household debt is still high while household income expands poorly. Nevertheless, residential developers may take this opportunity to offer more sales promotions to attract home buyers who gain from the new government’s measure in order to run down their unsold complted units
This measure will help reduce housing costs based on the personal income tax rate of each purchaser. Although houses with the prices under 5 million baht are account for about 80% of the residential properties in the market today, EIC expects the benefits from this measure to be rather insignificant as
(1) the stimulus is limited to the first home buyers,
(2) the latest tax privilege being granted has lower degree and shorter runtime than the measures in the past,
(3) housing loans from financial institutions are becoming more strict especially with the new LTV criteria, and
(4) the household debt is still high while household income expands poorly.
Nevertheless, residential developers may take this opportunity to offer more sales promotions to attract home buyers who gain from the new government’s measure in order to run down their unsold complted units
Thailand’s government issued a tax incentive to promote the public’s residential ownership, granting personal income tax allowance for the people who purchase houses and lands or condominiums worth up to 5 million baht. The given allowance is based on the actual paid amount but not exceeding 200,000 baht each. This measure can only apply to those who register themselves as first-home buyers during April 30 – December 31, 2019, and hold the property ownership for over 5 consecutive years since the registration date.
The government anticipated that this housing stimulus measure would cost them to lose tax revenue of about 1,350 million baht.
EIC expects that this stimulus will help ease housing expenses of a number of first-home buyers. The level of support will depend on each individual’s tax base.
The first-home buyers who make less than 25,000 baht per month however will not benefit from this scheme.
The reducing housing costs are due to the additional allowance for personal income tax calculation. The tax deductible amount will be defined by each payer’s tax rate. Being responsible for higher tax base, individuals with higher numbers of income will be benefited more. For instance, a purchaser of the first home of under 5 million baht, who pays tax at a rate of 35%, will be supported by the government’s measure at the amount of 70,000 baht while a payer of 5% tax rate will earn 10,000 baht tax exemption. Meanwhile, individuals who make less than 25,833 baht a month (single, receiving no other allowances apart from the lawfully deductible 60,000 baht, and not contributing to the social security fund) will not earn any benefit from this stimulus (Figure 1).
Although this year’s housing stimulus measure is similar to those issued in 2011 and 2015, the positive effects on taxpayers who spend on their first homes could be less.
The earning…