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Thai central bank eases mortgage rules to support property sector


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2021-10-21T042741Z_1_LYNXMPEH9K04Q_RTROPTP_4_THAILAND-ECONOMY-RATES.JPG

FILE PHOTO: Thailand's central bank is seen at the Bank of Thailand in Bangkok, Thailand April 26, 2016. REUTERS/Jorge Silva/File Photo/File Photo

 

BANGKOK (Reuters) - Thailand's central bank has further eased rules on mortgages to boost a key property sector struggling from the impacts of the pandemic, officials said on Thursday, sending property shares higher.

 

The loan-to-value ratio limit has been lifted to 100% from 70-90% until end-2022 to increase activity in the real estate sector, which will take years to recover, officials said. The rules were effective on Wednesday.

 

"Uncertainty remains high and some sectors are still fragile, so measures have been introduced to stimulate the economy and increase jobs," Roong Mallikamas, an assistant Bank of Thailand (BOT) governor, told a news conference.

 

The measures will be for all housing loan contracts, including refinancing, while there is little sign of speculation in the sector, she said.

Shares in real estate developers rose 1.2% at the lunch break, with Origin Property up 6.5% and Noble Development up 3%.

 

The property sector accounts for about 10% of Thai gross domestic product (GDP) and employs 2.8 million people, said senior BOT director Don Nakornthab.

 

The BOT has forecast GDP growth of 0.7% this year and 3.9% in 2022, following a 6.1% slump last year.

 

Southeast Asia's second-largest economy is expected to return to pre-pandemic levels in early 2023, but the property sector will take much longer to normalise, Don said.

 

"The economy has already bottomed out. But without additional measures, property sector activity is not expected to return to pre-crisis levels until 2025," he said.

 

"We are hoping the measures will help the property sector recover faster," Don said.

 

The easing of rules, together with any additional measures, are expected to increase home loans by about 50 billion baht ($1.5 billion) per year, Don said.

 

The finance ministry is also considering extending some property measures to help the sector, Don said.

 

Reuters.jpg

-- © Copyright Reuters 2021-10-21
 

 

(Reporting by Orathai Sriring, Kitiphong Thaichareon and Satawasin Staporncharnchai; Editing by Martin Petty)

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Hmm, more debt. Got trouble stamped all over it, especially as interest rates are likely headed upwards everywhere in the short term. This fantasy land of free money and the entitlement to it, needs to end... even at the cost of growth. Help the developers at the cost of your average Joe who might flounder and then it's the bank's problem... OK, can see that and guess the average Joe is just the insignificant middle player.

Although, due to western economies questionable strategy of allowing QE - which in the land of the sane is a short term economic stimulus measure - to go on for 15 years, interest rates in the West are inevitably going up as the stars seem to be aligning for it now, maybe up even to as far back as to 2007 levels eventually (5%) in the short-medium term.

This might have a silver lining for expats bringing foreign currency as higher interest rates in Europe/US etc. should translate into money exiting places like Thailand and flowing back to safer economies with better returns. Often times, that translates to a stronger western currency and hopefully a weaker baht so we could get a better bang-for-our-buck ultimately, so to speak.

Edited by Sir Dude
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27 minutes ago, Chad3000 said:

They should allow foreigners to buy property with wages earned in country. Just so stupid.

Yes. If they allowed foreigners to buy property in the same manner and rights as Thais, the market would strengthen immensely, regardless of where the money came from.  

 

This obsession with everything to be bought and proven to be made with foreign funds is absolutely ridiculous, from immigration income requirements, to property ownership.

 

I understand that they have fears of overheating the market making it unaffordable for Thais, but it would also support higher local incomes and wages helping Thailand climb out of the third world.

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42 minutes ago, Sir Dude said:

Hmm, more debt. Got trouble stamped all over it, especially as interest rates are likely headed upwards everywhere in the short term. This fantasy land of free money and the entitlement to it, needs to end... even at the cost of growth. Help the developers at the cost of your average Joe who might flounder and then it's the bank's problem... OK, can see that and guess the average Joe is just the insignificant middle player.

Although, due to western economies questionable strategy of allowing QE - which in the land of the sane is a short term economic stimulus measure - to go on for 15 years, interest rates in the West are inevitably going up as the stars seem to be aligning for it now, maybe up even to as far back as to 2007 levels eventually (5%) in the short-medium term.

This might have a silver lining for expats bringing foreign currency as higher interest rates in Europe/US etc. should translate into money exiting places like Thailand and flowing back to safer economies with better returns. Often times, that translates to a stronger western currency and hopefully a weaker baht so we could get a better bang-for-our-buck ultimately, so to speak.

The book value of property in Thailand, just like other figures, is massaged no doubt using various creative accounting practices.

How can a city like Pattaya carry 1000's of empty condo's with no fire sales?

It's nonsense.

Evergrande's share price was down over 10% today. A sale of assets fell through and a bond payment is looming.

With little or no tourism for years to come, the whole Thai property market is a deck of cards.

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9 hours ago, Cherrytreeview said:

The book value of property in Thailand, just like other figures, is massaged no doubt using various creative accounting practices.

How can a city like Pattaya carry 1000's of empty condo's with no fire sales?

It's nonsense.

Evergrande's share price was down over 10% today. A sale of assets fell through and a bond payment is looming.

With little or no tourism for years to come, the whole Thai property market is a deck of cards.

I really don't have anything to baee this on but my experience living here for so long.

 

I think there is probably some special secret method of shunting NPLs off the bank's books. As long as it's the bank's money and not outstanding debt than can be called the can is just kicked down the road. One thing is certain - some financial sorcery must be taking place for an inplosion not to have taken place.

 

Conveniently, there are no public market tools to evaluate property.

 

Raising debt ceiling will do nothing. People over their heads in this economy won't borrow and the banks won't lend. Then you have the core of the issue is that asking prices are 25-50% over the value of the property.

 

Finally, lots of poorly designed condos which no one wants.

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3 hours ago, Chad3000 said:

I really don't have anything to baee this on but my experience living here for so long.

 

I think there is probably some special secret method of shunting NPLs off the bank's books. As long as it's the bank's money and not outstanding debt than can be called the can is just kicked down the road. One thing is certain - some financial sorcery must be taking place for an inplosion not to have taken place.

 

Conveniently, there are no public market tools to evaluate property.

 

Raising debt ceiling will do nothing. People over their heads in this economy won't borrow and the banks won't lend. Then you have the core of the issue is that asking prices are 25-50% over the value of the property.

 

Finally, lots of poorly designed condos which no one wants.

Appreciate your informed response from someone who is a long term Thai resident.

There is no doubt there is a niche, high end condo market that the affluent desire and that will retain its value.

However, it is mind boggling to think of the empty and unfinished condos plus the new very serious issue of existing owners not returning and abandoning their condos.

What percentage of maintenance fees have been paid?

If you keep a property at home you will always get a tenant or have a market to sell in.

 

 

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10 minutes ago, spidermike007 said:

 A friend of mine recently moved to Pattaya. He looked at condos in Jomtien. He walked into one of the nicest towers, looked at a 36th floor unit with panoramic views, and when he was quoted 28,000 a month, he offered 10,000. They settled on 13,000. He said the agent more or less admitted the building was nearly empty, and they could not rent to sell anything, at this time.

I would steer clear of empty condos , especially way up on 36th floor

If condos are empty maintenance is neglected...none are using stairs to get to the 36th floor ;)

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17 hours ago, snoop1130 said:

Thailand's central bank has further eased rules on mortgages to boost a key property sector

Ah shades of 2008 USA before Financial Collapse

 

These banks do realize they are not too big too fail?

When customers all start sending in "Jingle Mail" (house keys to homes they are defaulting on ) like they did in the USA

I do not think they can print their way out of it as the USA being the world reserve currency did

 

Not that the USA is any shining example of how to handle debt with their kick the can down the road policies 🙄

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16 hours ago, Cherrytreeview said:

The book value of property in Thailand, just like other figures, is massaged no doubt using various creative accounting practices.

How can a city like Pattaya carry 1000's of empty condo's with no fire sales?

It's nonsense.

Evergrande's share price was down over 10% today. A sale of assets fell through and a bond payment is looming.

With little or no tourism for years to come, the whole Thai property market is a deck of cards.

Not only was the Evergrande share price down yesterday, but it was reported that 2 more very large Property Developers in China had defaulted on Loans

!00 % of Loan to book value on these new Thai loans is a very scary proposition indeed.

I would fully expect the Loans in special situations and also NPL loans to skyrocket over the next couple of years or so.

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Offering 100% is absolutely stupid.

When i lived in Portugal, they were all in the game.

Builders were inflating there prices.

Banks sent someone to appraise the property.

Real estate agent wanted high prices.

 

10% own capital required but many did not have so much. What did they do? Banks valued the property 10-15% higher and so, the potential buyer got the loan in relation to the appraisal, means, the buyer got a full 100% finance and often the banks gave a higher loan to buy new furniture and why not to buy a new car, once you are at it.

 

It will not end well.

 

I am happy to be a renter. I just signed a new 1 year deal for the condo I live in.

Again, I knocked the price 10% down.

Take it of leave it. You don't want, I move to the apartment next door.

Many of them have taken out loans to buy another apartment in hope to sell it quickly, once the property is finished. Didn't happen.

Rental properties are everywhere. The ones struggling to pay their mortgage accept almost every offer you make them, in order to have some help, paying back the loan.

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Struggle? I thought a tsunami of Russians and Chinese was champing at the bit to swoop in and buy thousands and thousands of condos. Wasn't that in a forum topic a couple of weeks ago?

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Seems like we are all pretty much in agreement.

 

SCB is technically backed by unlimited wealth. I'm guessing that insurance can (is) had at a price for any bank.

 

The hapless condo owner that wants to move but can't get his ridiculous price can stay put forever. As long as people have jobs they can stay put. Yet, that does nothing for the new developments.

 

Russian, Chinese as comments made. Finished. In the more honest articles you'll see recovery projected into 2025. Even still they don't get it. The problem isn't .5%  the country was only running around 1.5+% prior to covid. Housing has systemic problems.

 

I think living here for foreigners is tenuous as well. Nothing is spelled out, nothing can be counted upon. Government is throughly inscrutable.

 

Waiting for Evergrande to default on those foreign paper....

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