Avoiding Property Bubbles:

[george]

AVOIDING PROPERTY BUBBLES:

BOT calls for early warning system

BANGKOK: The Bank of Thailand is to meet with representatives from both the government and private sector to discuss the possibility of a property-market index and database that would be used as an early warning system for possible bubbles.

While central bank Governor MR Pridiyathorn Devakula, however, did not provide details on

the index, he did say it would

help the authority to forecast business trends in the property sector.

He also said that there was insufficient information and too many rumours abounding in the property market.

If it is developed, the index would help integrate and upgrade information on the market to international standards, he said.

“We don’t have an overall picture of demand and supply in the market, so all relevant organisations have to join hands to make it happen,” he said.

Several property-market watchers have expressed concern over a possible asset-price bubble, as there has been speculation in some segments, particularly condominium projects.

They say that if property developers are not prudent and produce an oversupply in the market, the country will repeat the mistakes of the financial crisis of 1997.

Pridiyathorn said the central bank would like to establish an in-depth database that is up to international standards and which

will provide early-warning signs for business and government.

“The new database system will be modern and complete, as in developed markets. As a result, we would know how many new houses have been built,” he said.

Some state-owned entities such as the Government Housing Bank, Finance Ministry and the National Housing Authority have their own database. But that is not enough, Pridiyathorn added. A source from the central bank said the bank aimed to collect information on the property market by tracing back at least five years to the 1997 crisis.

The database and index are expected to be ready next year.

Meanwhile, Samart Buranawatanachoke, a senior director at the Strategy and Financial Institutions Policy Department, said the central bank would soon set a ceiling on lending for property projects.

Any financial institutions that lend more than this amount to a developer will have to report the details of the developer and the project to the central bank, he said.

--The Nation