Today's announcement by the Government to spur the sluggish property market in sleuth's opinion will not do much for the short term. Sure, the short-term stimulus measures to be implemented within the next two weeks which will only be effective for one year should bring some much needed cheer to this super competitive, over supplied (in some sectors) and evaporating purchasing power property sector.
This stimulus will include the reduction in the specific business tax for developers to 0.11% from 3.3%, as well as a cut in land transfer and registration fees to 0.01% from 2%. There is also talk of interest rate reductions by banks in the near term which should make housing payments slightly more affordable. Sleuth reckons there is only a single sector that may benefit in the short term, i.e. the lower end market or budget type residential developments.
Overall, these boosters should improve demand towards the 4th quarter when sentiment improves with new elections and hopefully with the eventual return of business confidence. One must not forget why a massive US$500 million has already been spent by Thais during the last few months to acquire 'Jatukam Ramathep' amulets mainly in the form of cookie sized medallions. Fervent Thais believe this amulet will provide good luck especially in times of job insecurity and business uncertainties reflecting the current poor sentiment among the populace. Measures are welcome but one must still look to the 4th quarter of 2007 and the 1st quarter of 2008 before demand actually picks up again for the present poor property market in Thailand.
What is really needed? Basically the right kind of message to send to all investors and reverse those unfriendly draconian measures that scared them in the first place. This will instill some much needed confidence back into Thailand once more. Easier said than done...
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