Most developers dismissed the measure yesterday as being of little assistance, particularly as 400 small property firms have already withdrawn from the market.

The Finance Ministry proposal, which is expected to go to the Cabinet for approval next week, doubles the level of mortgage-interest payments qualifying for tax allowances.

Property Perfect's assistant managing director Teerachon Manomaiphibul said the Finance Ministry's measure would have little impact on the property market, when it is considered that the industry faces negative impacts from home-buyers delaying their decisions to purchase because of rising costs of living as a result of higher oil prices and political uncertainty.

He said that because the purchasing power of new-house buyers has fallen, the property market will grow by only 5 per cent in terms of volume this year - but its total value will plummet by up to 25 per cent, from last year's Bt600 billion to about Bt450 billion.

In the first two months of the year, 10,150 residential units were transferred in Bangkok and its suburbs. This was an increase of only 2.2 per cent from 9,926 homes transferred in the first two months of last year. However, in terms of value, the residential units transferred in the first two months were collectively worth only Bt23.34 billion - a fall of 25 per cent from a collective value of Bt31.36 billion in the corresponding period last year.

Most property firms listed on the Stock Exchange of Thailand announced total sales and net profits in the first quarter that were down by 10 per cent to 30 per cent over last year's figures.

As a result, most of them have accepted the need to increase their marketing budgets to boost sales to somewhere near their targets for the year.

Land and Houses has set aside a marketing and rebranding budget of Bt600 million; Asian Property has allocated Bt700 million to marketing, up 16 per cent from last year; and Property Perfect will spend Bt240 million on marketing, an increase of 20 per cent.

Teerachon said medium-sized to large property firms are able to hike their marketing budgets to maintain sales. However, because the government's measures will not support the property business, most small property businesses will be unable to handle their problems because they are unable to obtain loans from commercial banks.

He said that in the 1997 financial crisis, 3,000 small- and medium-sized property companies - with projects collectively valued at between Bt100 billion and Bt300 billion - had to withdraw from the market with a serious negative impact on the property industry because most of them were unable to deliver houses to their customers. However, with economic recovery, 500 small property companies returned to the market.

Now, as many as 400 of these small companies have once more withdrawn from the property business by selling their projects to larger firms. The remaining 100 will go to the wall if the government does not introduce strong measures to help them, Teerachon said.

"We don't need any new help, but we want the government to send a message to commercial banks, asking them to provide loans for property projects and also to be more flexible in providing loans for home-buyers who may not have a credit record," he said.

Plus Property managing director Piyabutr Lertdumrikarn said his company would have to launch a new marketing campaign to drive its sales in the second half of the year, because the government's tax allowance on mortgage-interest payments will be little benefit to home-buyers.

With the yearly tax allowance on mortgage interest doubled to Bt100,000, those taxed at 10 per cent will see their tax refunds increase from Bt5,000 to Bt10,000, while those who are paying 30 per cent will get a Bt30,000 tax refund instead of Bt15,000. This will not boost purchasing power, Piyabutr said.

However, LPN Development's managing director Opas Sripayak said that although the tax allowances will have little impact on the property market, they were better than nothing at all.

"We think the government's measure shows that it is concerned about the property market, although it will have little impact on the industry," he said.

Somluck Srimalee

The Nation