Wednesday, November 20, 2019

Govt cutting property transfer, mortgage fees might not be as effective as expected

Oct 27. 2019
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By The Nation

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The government has launched a new economic stimulus measure to boost the real estate business by lowering property transfer fees from 2 per cent to 0.01 per cent and mortgage fees from 1.0 per cent to 0.01 per cent for buying condominium units priced at not over Bt3 million.

Also, the Government Housing Bank will offer loans for the purchase of real estate with a total limit of Bt50 billion. The interest will be stable at 2.5 per cent in the first three years, will rise to 4.625 per cent between the fourth and fifth years, and will have to be repaid with up to 1 per cent of Minimum Retail Rate (MRR) for people with welfare or 0.75 per cent for retailers, which will be 6.625 per cent a year from December 24, 2020.

Sopon Pornchokchai, president of the Agency for Real Estate Affairs, who are independent property consultants, said the measures had their pluses and minuses. The good news was that the measure allowed customers to repay at a lower rate and the bad news is it might be a trap for real estate buyers because even though the measure seemed to help people with low or average incomes trying to buy affordable houses, it actually supported land developers as it only allows customers to buy houses from developers, not second-hand houses.

He said the Bt50-billion loan limit might cover only 1.7 per cent of the total value of new property and might not be as effective as expected. In the first three years, even though the interest was low, the customers did not repay the principal amount and in the sixth year, the bank can adjust the MRR to any rate which could be higher helping the bank to collect more fees.

Lowering the transfer and mortgage fees may encourage people to buy houses but may also cause loss of revenue in a developing country. "We need to raise awareness of the importance of paying taxes for buying houses at the full price and 1.5 per cent interest, which would allow the government to have a higher capital budget," said Sopon.

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