The Home Builder Association (HBA) reported that the home building market in the first quarter of 2024 was sluggish, with purchasing power hitting a brake due to a lack of confidence stemming from negative factors such as household debt and high interest rates. However, confidence in Q2 is expected to be boosted by government measures to stimulate the real estate sector, including tax reductions for home construction. This is anticipated to support overall market growth beyond expectations, alongside an accelerated marketing strategy targeting the renovation market to enhance construction order growth.

Mr. Worawut Kanjanakul, Honorary Committee Member of the Home Builder Association (HBA) stated that the economic stimulus measures approved by the Cabinet on April 9, 2024, will positively impact the overall real estate market and the home building sector in Q2 of 2024, showing signs of improvement due to government incentives. This is expected to lead to a recovery in sales after a slowdown in the first quarter of 2024, caused by the overall economic situation, rising interest rates, high household debt, and stricter lending policies from banks, which resulted in a rather sluggish home building market in the first quarter of this year.

“The awareness and sales generation efforts during the 'Home Building and Materials Focus 2024' event, held under the concept 'Big, Complete, All in One' with promotions over nine days from February 17 to 25, 2024, at Impact Hall 8, Muang Thong Thani, aimed to attract consumers interested in building homes. However, it was found that many consumers are still delaying their decisions due to the economic situation, resulting in the target for construction orders during the event not being met,” Mr. Worawut said.

This marks the first time the home building market has received a tax reduction measure for constructing homes on one's own land. The measure “Tax Reduction for Home Construction: 10,000 Baht per Million” provides personal income tax deductions for those building a new home, limited to one house per construction contract with a home building company that has paid stamp duty. The tax can be paid online to the Revenue Department, with contracts signed and construction starting from April 9, 2024, to December 31, 2025. The construction cost can be any amount, but consumers will receive a personal income tax deduction of 10,000 Baht per million Baht spent, capped at 100,000 Baht, based on actual payments as shown on the tax invoice from the home building company. Consumers will be eligible for the tax deduction in the following tax year after the home is completed.

The benefits of the “10,000 Baht per Million” tax reduction measure will positively impact four groups:

“Consumers” planning to build homes on their own land will be able to reduce their financial burden by deducting the construction costs from their personal income tax, which will help them make quicker decisions, especially since some have delayed due to the economic situation.

“Retailers and construction material companies” will see increased sales from the overall growth in home construction orders.

“Government revenue” will benefit from the personal income tax deductions for construction costs, amounting to 10,000 Baht per million Baht, capped at 100,000 Baht, which will positively impact government revenue collection from VAT at 7%, both from purchasing various construction materials and from home construction contractors.

Accelerating Marketing Strategies to Capitalize on Good News

As the “10,000 Baht per Million” tax reduction measure will take effect from April 9, 2024, until December 31, 2025, accelerating market opportunities and implementing the right strategies will further boost the home building market's growth in Q2.

Marketing channels play a crucial role in creating awareness of home building companies among target groups, such as presenting new house designs and services.

Support from the association's budget for medium and small members, who may lack sufficient capital, will provide more opportunities for them to exhibit, benefiting the overall event's vibrancy and attracting visitor interest. Consumers planning to build homes will have a variety of options in terms of house designs and price ranges.

Additionally, developing attractive marketing campaigns and promotions will broaden awareness among target groups, along with planning to utilize various media channels, both online and offline, to enhance consumer reach and considering suitable venues that are easy to access for event participation.

Renovation: A Promising New Market

Moreover, another important strategy is to seek new markets and new purchasing power to supplement the existing customer base. Mr. Worawut mentioned that the home building business, besides constructing new homes on clients' land, has a highly interesting avenue in the renovation market, which is large and spread across various locations, including Bangkok, the surrounding areas, and provinces.

The advantage of taking on renovation projects is that it requires less investment, can be completed quickly, and allows for quicker revenue collection, providing an additional income stream for the company, with significant growth potential driven by demand in the second-hand housing market.

Controlling Construction Costs

In addition to marketing strategies, another crucial factor in the home building business is cost management, which should be conducted meticulously, especially for concrete and steel, which have been continuously rising in price, contrasting with the current labor supply that is sufficient to handle the increased construction orders.

“Rising oil prices and increasing steel prices are factors that the business must manage, particularly as construction material costs are rising. Steel prices have already increased by 5-10%. Home building companies are trying to maintain their original price levels and not increase them, despite the factors that are driving up construction costs,” Mr. Worawut stated.

Finally, Mr. Worawut emphasized that government measures aimed at stimulating the economy, private sector businesses, and consumer confidence, along with the association's marketing and promotional strategies, are two catalysts that will lead to the overall home building market in Q2 and the last two quarters of 2024 exceeding the set targets.