Thai Household Debts Nearly Double In Seven Years

[siamamerican]

Does a family need a home to live in?

Absolutely. However there is a greater tendancy to buy more home than one can afford when one intends to sell it again in the short to medium term... and I've seen that there is often a trend to make the curve even steeper when the prospect (sometimes real, sometimes wishful thinking) of potential near term profit is added to the equation. This is both among Thais and falangs that come to me for short term bridge financing for all kinds of financial shortfalls, often real estate speculation related.... and often AFTER they've been turned down by the local banks. Needless to say, I often also have to turn them down as well.

Flipping a home has nothing to do with debt.

The more I read your post - I think you are arguing against mortgages.

I'm not against flipping OR mortgages per se. I'm simply used to advising folks against getting into flipping and mortgage situations that they IMO shouldn't be getting into. It's hardly a black and white decision that can be labeled as safe, high risk, or flat out a very bad idea. When I hear people getting into 10% down payment 15-20 year mortgages when they have uncertain/unstable business operations or jobs, I often tell them that they might be better off buying "less house" and that adding a 12% p.a. interest loan to their debt portfolio to help finance said house is NOT a good idea. And yes, sometimes I'll tell people that they might be better off putting off that purchase for now.

For flippers, when people don't have sufficient backup assets and just got turned down by K-Bank for a Taweesap loan at MLR for a property purchase they intend to flip, I'll often tell them that I can't loan them the funds either because I don't want to get stuck holding your deep in the soi property that doesn't fit my 'ideal' property for collateral profile should your flipping plans not pan out as you expect them to. I simply tell them that the reason is that I'm considering the often high probability downside.... which they IMO apparently are not.

I'm more than familiar with the emotional state of these folks. There is often a lot of anger and frustration and a feeling that I (or the bank or finance company) am somehow impeding their imminent financial betterment. I often have to explain to them that they shouldn't feel that way because if I had made similar decisions that they were trying to make, that I wouldn't be in a position to loan them the funds to get into such situations. I say that they should probably thank me for giving them this advice. And they often do (but I doubt that they really mean it). And I bet that they often continue their search for leverage options and eventually end up between a rock and a hard place at an outrageous interest rate.

p.s.... and I should say that some might even beat the odds and hit it out of the park as well.

I agree. I think we may have been saying the same thing all along. If you purchase a house you can't afford and intend on flipping it, then you might loose everything. I work in the mortgage industry and what a mess it has gotten itself into the last 5 years. I work for an extremely conservative lender, but nonetheless we are taking big losses. Extending credit to borrowers that were living paycheck to paycheck is what is causing most the problems. When home values drop, they start using their paychecks on other things than the mortgage.

The brothers I was referring to in my earlier post are flipping homes they can afford. One doesn't doesn't use borrowed money and the other does, but borrows money responsibly. Both live in the homes and would remain in the homes if it wasn't financially viable to flip it.

[Heng]