Land prices expected to drop when new tax law enters force next year
LAND PRICES will drop by as much as 10 per cent next year after the land and building tax becomes effective, Pruksa Real Estate chief executive officer Thongma Vijitpongpun has forecast.
“Most landlords who hold land banks will face higher costs when they have to pay tax, which will force them to sell their land. This will cut land prices by up to 10 per cent from this year’s levels because the land supply in the market will be higher than now,” he said after a press conference yesterday.
According to a survey by The Nation, land prices in the central business districts (CBDs) reached a high of Bt2 million per square wah (Bt500,000 per square metre) on Sukhumvit Road, as paid by SC Asset Corporation early this year to develop luxury condominiums. But another deal under negotiation for land on Rama IV Road looks like hitting Bt3 million per square wah when it is finalised, possibly by the end of this year.
Pruksa paid Bt700,000 per square wah for land on Sukhumvit 61 that it will develop for a luxury condominium project next quarter. The company is also negotiating to buy land for Bt1.5 million per square wah on Sukhumvit 55 (Soi Thong Lor) for another luxury condominium.
In a phone interview with The Nation yesterday, Prasert Taedullayasatit, Pruksa president for premium markets, said many landholders were putting their land in the CBDs on the market now so as to avoid having to pay the new tax next year.
Under the new tax law, which will be enforced by local governments nationwide, a first home valued below Bt50 million will be exempted from tax, while a maximum 0.5-per-cent rate will be applied to a second home or first home appraised above Bt50 million.
A maximum 0.2-per-cent rate will be levied on agricultural land and 2 per cent on commercial and industrial land.
A 5-per-cent rate will be slapped on undeveloped land in the first three years and the rate will be doubled if the land remains vacant in the following three years.
The rates will vary from province to province.
The Finance Ministry expects the tax collected under the new law for the first year should hit Bt60 billion, double the Bt30 billion collected annually under two existing laws – the Property Tax Act and Local Maintenance Tax Act.
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