Landowners must decide what to do with vacant plots ahead of the possible new land and buildings tax. APICHART JINAKUL

The new land and buildings tax, which is expected to come into force in January 2019, is pushing landowners to either divest of vacant plots, seek partners to develop their land or hire property consultants to manage their land.

Many wealthy landowners have been thinking about renting, selling or developing their assets, said Ratchaphum Jongpakdee, general manager of property consulting firm Colliers International Thailand.

"A lot of the reviewing is for vacant plots," he said. "They have been thinking about doing something with them after learning the new tax will be effective from January 2019."

Some have decided to sell or rent out some of their land. Most of these plots, situated in prime locations in Bangkok, will be taxed at a high rate under the draft tax because of high appraisal prices.

The draft of the tax bill calls for a rate of 0.05% to be applied to first homes and agricultural land worth between 50 million and 100 million baht, and a 0.1% rate for homes above 100 million.

Land for second homes will be taxed at 0.03-0.1% of its appraisal price. Land for commercial and industrial use will be taxed at 0.3-1.5%.

The tax on vacant land will start at 2% and rise by 0.5 percentage points every three years, until it reaches 5%.

"Some landlords are seeking partners to participate in joint ventures to develop projects on land that has been idle for years," said Mr Ratchaphum.

Colliers Thailand is organising an auction for a 524 square wah plot on Sukhumvit Soi 12. The firm targets an 800 million baht price for the property, or around 1.52 million baht per sq w.

According to the Treasury Department, during 2016-2019 land along Sukhumvit Road in Klong Toey district was appraised at 210,000-650,000 baht per sq w. The appraisal value of the Sukhumvit 12 plot tendered by Colliers is 110-340 million baht.

If the land and buildings tax act is effective, this plot will be taxed at 2.2-6.8 million baht a year.

The plot's owner is open to selling the property or developing it through a joint venture, said Mr Ratchaphum. "There are two foreign investors bidding for a joint venture with the landowner. The bidding will be finalised within this week," he added.

The foreign investors include a Malaysian contractor interested in developing a condominium and a Japanese developer that wants to build a hotel, he said.

Many high-net-worth families, with large interests in property, are alarmed by the land and building tax. Among those that have hired Colliers Thailand to manage their plots are the Osathanugrah family and Prasarttong-Osoth families.

The Osathanugrah family's plots (each sized 1-10 rai) are mostly located along Sukhumvit Road from Bang Chak BTS station to Pak Nam in Samut Prakan. Plots near BTS stations could be developed into condominium projects.

"Ask yourself whether you want to hold that land or not. Everyone has a different answer," said Suwannee Wattanavekin, executive vice-president of Kiatnakin Bank Plc's asset management department. "To manage it, you should know its cost, market price and tax rate. Then you can plan what to do with it."

A landlord who has owned a one rai plot on Soi Thong Lor for a long time, had an effective ownership cost of zero. After the tax is implemented, he or she will need to pay 2% of the land appraisal price (420,000 baht per sq w), or 3.36 million baht a year.

However, the market price for land on Soi Thong Lor is now at least 1.5 million baht per sq w. Land prices in Bangkok's prime locations is increasing 5-10% per year, according to Colliers.

"Tax ceiling for a vacant plot may be 5% of the land appraisal price, but land prices are increasing more than 5% a year," said Mrs Suwannee. "At no cost, it is worth holding the plots, particularly those in prime locations."

People should not panic over the new tax, she said, but start analysing their plots' costs, locations, price increases and potential for development.