Article by Samma Keetsin
Director and Independent Director, Sena Development Public Company Limited

In the last four months of 2021, there were several news items regarding government measures impacting the real estate market. Here are the five key measures summarized in chronological order:

1) The Cabinet approved on September 14, 2021, measures to stimulate the economy and attract high-potential foreigners to Thailand.

These foreigners were categorized into four groups: high-net-worth individuals, retirees from abroad, those wishing to work from Thailand, and individuals with specialized skills. Part of this initiative was assigned to the Ministry of Interior to study laws regarding land ownership, leading to various interpretations and the understanding that the goal was to attract one million foreigners to purchase housing in the country. However, realistically, the groups likely to buy property in Thailand would be limited to the first two categories, which could amount to only tens of thousands of units at most.

2) The Bank of Thailand announced a relaxation of the criteria for housing loan approvals by financial institutions for individuals, effective from October 20, 2021, until the end of 2022. This measure, lasting approximately 14 months, set the Loan-to-Value (LTV) Ratio at 100%, allowing financial institutions to lend up to the full value of the property used as collateral.

Previously, the Bank of Thailand had established LTV Ratio guidelines for financial institutions starting April 1, 2019. On January 20, 2020, the criteria were relaxed by reducing the required credit history for the first housing loan from three years to two years for loans under 10 million baht. In two scenarios: if the first loan had not been paid for two years, the LTV Ratio was set at 80% of the property's value; if the first loan had been paid for two years or more, the LTV Ratio was set at 90%. Additionally, for loans of 10 million baht or more, the LTV Ratio for the first loan was set at 90%, while the second and third loans remained at 80% and 70%, respectively.

3) The Property Valuation Committee for State Benefits issued an announcement on November 24, 2021, to implement the property valuation account under the Property Valuation Act of 2019, effective January 1, 2023, nationwide. Until then, the valuation account from 2016-2019 would be used to collect registration fees temporarily.

The current property valuation rates are based on the previous assessment round from 2016-2019. The Treasury Department had previously postponed the implementation of new land valuation rates from early 2020 to early 2021, then to early 2022, and now to early 2023 (or the end of 2022) due to the still-recovering Thai economy.

4) The Cabinet decided on December 7, 2021, to maintain the land and building tax rates under Section 94 for another two years, covering 2022 and 2023. On December 13, 2021, the Royal Gazette published the Royal Decree specifying the tax rates for the 2022 tax year and beyond.

Upon careful review, it was found that the collection rates remained the same as previously set under Section 94. However, since Section 94 was only applicable for 2020 and 2021, a new Royal Decree was issued. This decision referenced Section 94 but did not mention Section 55, meaning it only reduced the collection rate at the same level, not by the additional 90% as stated in Section 55.

Thus, to maintain the same tax rates for land and buildings as in 2020 and 2021, a new Royal Decree reducing taxes for certain types of land and buildings would need to be enacted in 2022 and 2023.

5) The Cabinet approved on December 21, 2021, measures to reduce registration fees for housing rights and legal transactions, effectively extending the previous fee reduction measures for transfer and mortgage fees, which were set to expire at the end of 2021, for another year until the end of 2022. The transfer fee for property ownership was reduced from 20,000 baht per million to 100 baht per million, and the mortgage registration fee was similarly reduced from 10,000 baht per million to 100 baht per million for residential properties such as single houses, duplexes, townhouses, commercial buildings, land with buildings, or condominiums with a purchase price and assessed value not exceeding 3 million baht, and mortgage amounts not exceeding 3 million baht.

These various measures from the government and regulatory agencies (Bank of Thailand) involve considerations for new measures, relaxation of existing criteria, and extensions of previous measures originally set to end in 2021, now extended to the end of 2022 or 2023. Therefore, stakeholders and consumers should thoroughly understand these changes before forming overly positive or negative opinions.