Construction stopped on more than 100 property projects worth up to Bt20 billion in the first quarter of the year as developers failed to get loans from commercial banks, according to a property expert.

Most of the projects belong to small and medium-sized developers and are worth between Bt100 million and Bt500 million each, said Dr Teerachon Manomaiphibul, senior executive director of Property Perfect.

"Their loan applications were turned down due to the bleak demand outlook. They have had to suspend construction. Some of them have decided to sell their projects to other property firms who are stronger financially," he said.

Many of the projects are located in Bangkok at Rangsit, Bang Bua Thong, Bang Na-Trat kilometre 10-30 and Suvinthawong. Most offered detached houses and town houses.

Teerachon said demand in the market had dropped 20 per cent in the first quarter as home-buyers delayed decisions to buy new houses because of fears of deteriorating economic conditions that could affect their income.

Many prospective home-buyers are waiting to see if the new government implements measures to support the property market, especially a possible reduction in the special business tax of 3.3 per cent, the transfer tax of 2 per cent and the one-per-cent mortgage fee.

"Almost of our customers ask us if we will reduce the price if the government approves the new measure. If not, they say they will wait," Teerachon said.

He added that in fact the tax incentive would have less impact than an interest-rate reduction. "If the interest rate went down 1 per cent, it would mean a 10-per-cent boost in purchasing power," he said.

Land & Houses president Anant Asawabhokin said there were signs that the property market would show 5 to 10 per cent lower growth than last year because of reduced purchasing power.

"I think tax incentives cannot drive purchasing power, when home-buyers are still worried about their earnings in the future. If the government really wants to boost the property market, it has to come up with stimulus measures to ensure that economic growth stays above 5 per cent a year," he said.

If the country's GDP expands 5-6 per cent a year, that will boost purchasing power; if the growth rate is lower than that, it will be a difficult time for the property market this year, Anant said.

After the government signalled the likelihood of new tax measures a few weeks ago, most who were about to buy homes delayed their decisions, expecting the government to issue the new measure.

"We don't want any tax measure for the property sector, but we want the government to focus more on boosting the country's GDP as a whole. Once the overall economy posts strong growth, demand for housing will rise, as in the past two years," Anant said.

Somluck Srimalee

The Nation