Tax amnesty should be able to provide a fresh breeze in the property industry, especially in increasing capital expenditures (capex). Property developers with large capitalization seem to have been reducing their capex since 2015. What are the causes and its impacts?
In the period of 2011-2014, capex of property developers was increasing, both in terms of the amount or the portion of the revenue. It was the period when the company was able to sell its product rapidly, followed by the swift decline in land reserves. The reserves need to be restored, therefore we saw high capex.
While in 2015 and 2016, the property industry seems to be constrained, although the external factors support it. The Loan-to-Value policy is loosened, Tax on Land and Building Rights is lowered, the interest rate drops, and REITS instrument is simplified.
However, towards 2017, the property industry should be prepared to strengthen their long-term strategy. More companies are expected to increase their capex along with the ease of financing in the industry. Developers who squandered this opportunity will not be able to compete in the future.
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