Thailand's First-Car Scheme May Hit Buying Power In Low-Priced-Home Segment

[webfact]

FIRST CAR IMPACT

First-car scheme may hit buying power in low-priced-home segment

Sucheera Pinijparakarn,

Somluck Srimalee

The Nation

BANGKOK: -- Property developers that sell housing priced between Bt1 million and Bt3 million may suffer from a drop in purchasing power of potential customers with monthly incomes around Bt20,000 if they bought vehicles under the first-car tax-incentive scheme last year.

Sales volumes in this price range are expected to drop by 5-10 per cent because people whose monthly income does no exceed Bt20,000 and now are saddled with car payments are unable to buy homes, according to a Kasikornbank executive.

In general, a monthly income of Bt20,000 is sufficient to allow purchase of a home whose price does not exceed Bt2 million.

However, the first-car scheme encouraged people in this income bracket to buy vehicles instead of housing, said Chatchai Payuhanaveechai, executive vice president at KBank.

He said a customer who earned Bt20,000 a month and bought a vehicle with a term loan of five years would have a monthly instalment burden of Bt9,000-Bt12,000, which meant this customer would be unable to buy a home during those five years.

Meanwhile, people earning Bt40,000 a month who joined the first-car scheme might be unable to buy a home costing more than Bt2 million, so the low purchasing power of some potential customers would have an impact on the homes |costing up to Bt3 million, he explained.

Currently, homes costing between Bt1 million and Bt3 million represent 30-40 per cent of the total housing market.

Projects in this segment are condominiums and townhouses.

Wichit Phayuhanaveechai, executive vice president for mortgage products at Bank of Ayudhya, agreed there was a high possibility that the low-priced housing segment would be affected by the first-car scheme.

Still, he noted that consumer purchasing power had a bright outlook thanks to the Kingdom's strong economic growth, so there was little need to worry about non-performing loans.

The NPL rate for mortgages at BAY is less than 2 per cent, he said.

Chatchai said the NPL rate for the housing-loan industry had stayed around 2 per cent for several years, while KBank's bad-loan rate in this segment was just 1.4 per cent. He added that this low rate reaffirmed that a bubble in the property market had not arrived yet.

Even though major developers during the first two weeks of the year announced greater volumes of new projects, the bankers predicted that the residential segment would not face risks from oversupply.

Chatchai said about 120,000-130,000 units were yet to be transferred from the total sales of 970,000 homes last year.

Weidt Nuchjalearn, senior executive vice president of Krungthai Bank, the second-largest holder of outstanding mortgages, said it was monitoring the bubble situation as well but had not seen any cause for concern yet, as reflected by the low rate of bad mortgages. The NPL rate for housing loans at KTB is 1.7 per cent at present and should drop to 1.5 per cent soon. Mortgages are secured loans, and customers don't want to see their assets to become bad debts, so the NPL rate is low compared with other segments, he said.

The loan-to-value rule can help prevent a bubble in real estate, he said. The delay in housing transfers is a concern for banks and developers because lending will decrease when the housing units are finished, Weidt said.

NEW MARKET SEGMENTS

Though property developers agree that purchasing power in the low-price segment may be lower because of the first-car programme, they have looked for new market segments to cover the shortfall.

For example, Sansiri plans to launch dCondo Campus Resort in Chiang Mai. This is a pilot project to replace its dormitory market.

"This market will comprise families who did not suffer any negative impact from the first-car scheme," Sansiri president Srettha Thavisin said.

Opas Sripayak, managing director of LPN Development, which develops condominiums in the under-Bt3-million segment, said the company was focusing on new market segments. They include condominiums close to workplaces and universities.

-- The Nation 2013-01-21

[Locationthailand]

A populist policy to entice people to have 'face' with a vehicle with a red plate, but at the expense of a basic necessity - affordable housing. I hope the property developers reflect that when it comes time to vote.

[fezman]

Also kbank are stupid , we went there for a loan ,my wife could show income of 40k per month from her job in Oz ,she also has assets in Thailand of more than 3 mil .we wanted a loan for 1 mil and they said no, get your mum to get a loan ,does she have a small shop or something for income ?

I think these bankers are mental ,they didn't want to look at statements from Oz bank and she has half a mil cash in her acc here . I said stuff ya we will get the money from Oz .idiots.but yer your right they would rather live in box and drive there new car to shops to show off than live in a decent house .

[MaxLee]

Well, if people buy cars, but can't afford houses, they can just sleep in their new cars

[hellodolly]

Surely the government must have realized that the money these people were going to spend on new cars had to come from some where. People were all ready spending it on some thing else.

All these populist policies do is move money around. When one benefits from a populist policy some one else will loose.

The trickle effect can not be bypassed no matter how much power or money your big brother has.

[kotsak]

Face comes first here.. the rest is politics..

Edited January 21, 2013 by kotsak

[MunterHunter]

How on earth can someone who is earning 20,000 per month then go out and commit to 9,000-12,000 per month in car repayments?

Amazing Thailand!

[MaxLee]

Face comes first here.. the rest is politics..

You mean Face first, the rest is corruption tea money paid under the table, followed up by a breaking of ethics and moral without getting punished

[Pimay1]

Well, if people buy cars, but can't afford houses, they can just sleep in their new cars

Believe it or not this has been happening in the US for many years.

[waza]

20,000,000 Thais on the credit blacklist so far, this populist scheme should increase those numbers. I love the housing bubble denials.

[Payboy]

First car scheme should cover trailer homes.

[kotsak]

Face comes first here.. the rest is politics..

You mean Face first, the rest is corruption tea money paid under the table, followed up by a breaking of ethics and moral without getting punished

I just summed it up..

[rkidlad]

With all the empty apartments and now this, can we expect more realistic rental and sale prices for apartments and condominiums in the future?

[HalibutJones]

With all the empty apartments and now this, can we expect more realistic rental and sale prices for apartments and condominiums in the future?

No.

[Hugo6]

Sales volumes in this price range are expected to drop by 5-10 per cent because people whose monthly income does no exceed Bt20,000 and now are saddled with car payments are unable to buy homes, according to a Kasikornbank executive.

sometimes the nation can't stoop low enough to slam this government's policies.

And they should know what the rest of us know - all Thais already have a home... even those with incomes below 20,000/month. On the other hand, the motorbikes are a bit chilly in the cold season, so let em spend their cash on a car.

[rubl]

Sales volumes in this price range are expected to drop by 5-10 per cent because people whose monthly income does no exceed Bt20,000 and now are saddled with car payments are unable to buy homes, according to a Kasikornbank executive.

sometimes the nation can't stoop low enough to slam this government's policies.

And they should know what the rest of us know - all Thais already have a home... even those with incomes below 20,000/month. On the other hand, the motorbikes are a bit chilly in the cold season, so let em spend their cash on a car.

My dear chap, you do need to do a bit of explaining here. Assuming that indeed all Thais already have a home, why would the government feel a need to have this 'policy to be implemented the first year' ? Did they err? Did they still have a few billion Baht they didn't know what to do with? Mistake, should be 'second home policy'?

[Hugo6]

Sales volumes in this price range are expected to drop by 5-10 per cent because people whose monthly income does no exceed Bt20,000 and now are saddled with car payments are unable to buy homes, according to a Kasikornbank executive.

sometimes the nation can't stoop low enough to slam this government's policies.

And they should know what the rest of us know - all Thais already have a home... even those with incomes below 20,000/month. On the other hand, the motorbikes are a bit chilly in the cold season, so let em spend their cash on a car.

My dear chap, you do need to do a bit of explaining here. Assuming that indeed all Thais already have a home, why would the government feel a need to have this 'policy to be implemented the first year' ? Did they err? Did they still have a few billion Baht they didn't know what to do with? Mistake, should be 'second home policy'?

what are you talking about?

[smutcakes]

How on earth can someone who is earning 20,000 per month then go out and commit to 9,000-12,000 per month in car repayments?

Amazing Thailand!

Because many many many Thais are used to living on less than 10K per month. Many live with parents, relatives etc

Stupid idea to spend any disposable on a car, but it seems you lack an understanding of how a large portion of the working population of BKK live.

We employ around 700 people with salaries between 11-14K per month- they pay rent, eat, send money home etc no problem.

[Semper]

With all the empty apartments and now this, can we expect more realistic rental and sale prices for apartments and condominiums in the future?

No.

You're right. This is Thailand and when sales are down, customers are scarce, prices go up.

[rubl]

Sales volumes in this price range are expected to drop by 5-10 per cent because people whose monthly income does no exceed Bt20,000 and now are saddled with car payments are unable to buy homes, according to a Kasikornbank executive.

sometimes the nation can't stoop low enough to slam this government's policies.

And they should know what the rest of us know - all Thais already have a home... even those with incomes below 20,000/month. On the other hand, the motorbikes are a bit chilly in the cold season, so let em spend their cash on a car.

My dear chap, you do need to do a bit of explaining here. Assuming that indeed all Thais already have a home, why would the government feel a need to have this 'policy to be implemented the first year' ? Did they err? Did they still have a few billion Baht they didn't know what to do with? Mistake, should be 'second home policy'?

what are you talking about?

My dear chap, for someone who talks in terms of 'as the rest of us know' you seem to be somewhat ignorant. Now please pay attention, I will explain this only once.

The topic is on 'first-car scheme' hitting buying power in 'low-priced-home-segment'. The government had in it's policy statement read out by PM Yingluck August 2011 a few policies to be implemented the first year. To be specific

"1.8.4 Introduce tax measures to reduce the general public’s burden of purchasing such essentials as the first house and car."

Now we have a KBank executive saying the 'first'car sales' bites into the 'low-priced-home sales' and you telling us 'all the rest of us know all Thai have homes'. Therefor my remarks.

All clear now, I hope. On the same level as all the rest of us

[NeverSure]

"Weidt Nuchjalearn, senior executive vice president of Krungthai Bank, the second-largest holder of outstanding mortgages, said it was monitoring the bubble situation as well but had not seen any cause for concern yet, as reflected by the low rate of bad mortgages. The NPL rate for housing loans at KTB is 1.7 per cent at present and should drop to 1.5 per cent soon. Mortgages are secured loans, and customers don't want to see their assets to become bad debts, so the NPL rate is low compared with other segments, he said.

The loan-to-value rule can help prevent a bubble in real estate, he said."

Ah, shades of denial. Ask any American including any homeowner or banker what happens to "loan to value ratio" if the value of your home in an overbuilt market drops by 40%. Yes it happened in just two months while even the chairman of the Federal Reserve continued to say there was no housing bubble. Six years later there may be some signs of a slow recovery. Prices may have hit bottom but aren't running back up quickly except in a very few select markets.

Anyone with a modicum of budgeting ability could retire nicely on just the amount the value of my home dropped in two months. Fortunately my home is free and clear and what's left is still a tidy sum. Others weren't so fortunate and lost everything.

Edited January 22, 2013 by NeverSure

[evanson]

Many years ago when having to visa run, I was taken by a driver to his home to fill in the form for immigration before setting off. He'd parked his big spanky new car in what looked like the big empty space underneath a shophouse. My heart sank when I noticed gold framed photographs of his aged/dead parents, on a nearby table. I hadn't removed my shoes. Well, it looked like a bloody garage On returning to town, I asked him to take me to a hotel. I'd noted his erstwhile cheery attitude had done a volt face He dumped me at a Wat some kilometers out of town.

The first of many of some of the more bizarre aspects of Thai culture.

[Hugo6]

My dear chap, you do need to do a bit of explaining here. Assuming that indeed all Thais already have a home, why would the government feel a need to have this 'policy to be implemented the first year' ? Did they err? Did they still have a few billion Baht they didn't know what to do with? Mistake, should be 'second home policy'?

what are you talking about?

My dear chap, for someone who talks in terms of 'as the rest of us know' you seem to be somewhat ignorant. Now please pay attention, I will explain this only once.

The topic is on 'first-car scheme' hitting buying power in 'low-priced-home-segment'. The government had in it's policy statement read out by PM Yingluck August 2011 a few policies to be implemented the first year. To be specific

"1.8.4 Introduce tax measures to reduce the general public’s burden of purchasing such essentials as the first house and car."

Now we have a KBank executive saying the 'first'car sales' bites into the 'low-priced-home sales' and you telling us 'all the rest of us know all Thai have homes'. Therefor my remarks.

All clear now, I hope. On the same level as all the rest of us

this may seem a bit difficult for you to undesrtand but this article is talking about the governments first time car purchase policy not about a first time house buying policy.

only the nation is trying to puke on a populist policy by finding someine who claims that people who buy cars cant afford houses. a rather obvious point by the way.

there is nothing ignorant about my post and you are allowed to apologize any time

all clear now, i hope. on the same level as all the rest of us. my dear chap.

[rubl]

My dear chap, you do need to do a bit of explaining here. Assuming that indeed all Thais already have a home, why would the government feel a need to have this 'policy to be implemented the first year' ? Did they err? Did they still have a few billion Baht they didn't know what to do with? Mistake, should be 'second home policy'?

what are you talking about?

My dear chap, for someone who talks in terms of 'as the rest of us know' you seem to be somewhat ignorant. Now please pay attention, I will explain this only once.

The topic is on 'first-car scheme' hitting buying power in 'low-priced-home-segment'. The government had in it's policy statement read out by PM Yingluck August 2011 a few policies to be implemented the first year. To be specific

"1.8.4 Introduce tax measures to reduce the general public’s burden of purchasing such essentials as the first house and car."

Now we have a KBank executive saying the 'first'car sales' bites into the 'low-priced-home sales' and you telling us 'all the rest of us know all Thai have homes'. Therefor my remarks.

All clear now, I hope. On the same level as all the rest of us

this may seem a bit difficult for you to undesrtand but this article is talking about the governments first time car purchase policy not about a first time house buying policy.

only the nation is trying to puke on a populist policy by finding someine who claims that people who buy cars cant afford houses. a rather obvious point by the way.

there is nothing ignorant about my post and you are allowed to apologize any time

all clear now, i hope. on the same level as all the rest of us. my dear chap.

Read again, dear chap. The topic is on 'first-car scheme may hit buying power in low-priced-home segment'. Both were aimed at and covered by the government policy which mentions 'essentials as home and car' in a single item 1.8.4.

BTW if this topic were really about 'first-car scheme' only, your initial remark 'all of us know all Thai have houses already' would be totally off topic as well

[Hugo6]

My dear chap, for someone who talks in terms of 'as the rest of us know' you seem to be somewhat ignorant. Now please pay attention, I will explain this only once.

The topic is on 'first-car scheme' hitting buying power in 'low-priced-home-segment'. The government had in it's policy statement read out by PM Yingluck August 2011 a few policies to be implemented the first year. To be specific

"1.8.4 Introduce tax measures to reduce the general public’s burden of purchasing such essentials as the first house and car."

Now we have a KBank executive saying the 'first'car sales' bites into the 'low-priced-home sales' and you telling us 'all the rest of us know all Thai have homes'. Therefor my remarks.

All clear now, I hope. On the same level as all the rest of us

this may seem a bit difficult for you to undesrtand but this article is talking about the governments first time car purchase policy not about a first time house buying policy.

only the nation is trying to puke on a populist policy by finding someine who claims that people who buy cars cant afford houses. a rather obvious point by the way.

there is nothing ignorant about my post and you are allowed to apologize any time

all clear now, i hope. on the same level as all the rest of us. my dear chap.

Read again, dear chap. The topic is on 'first-car scheme may hit buying power in low-priced-home segment'. Both were aimed at and covered by the government policy which mentions 'essentials as home and car' in a single item 1.8.4.

BTW if this topic were really about 'first-car scheme' only, your initial remark 'all of us know all Thai have houses already' would be totally off topic as well

dear chap - i read perfectly well... this is attacking one government policy and only one governement policy - it is about the 1st time car buyer program.

the article doesn't mention anything about the home buying program, does it? no it doesn't. Only you do that.

And to be clear, this is just the nation stooping as low a possible to try to denigrate what has been a successful policy - in spite of the smoke screen you are putting up here.

and out here in the countryside there is not a single thai person without a home. thank you extended family. great system.

and out here in the countryside, just for the record, the first time car buyer program doesnt seem to have slowed down the home building process - just based on observation and the happy smiles at the local home building supply shops.

the article is just sour grapes from the nation - not a surprise.

[mrtoad]

Not just low income earners taking advantage of this. The populist policy is wide open to abuse.

[whybother]

The Bangkok Post is reporting that the government are going to help out people who can't pay loans in the First Car Buyers scheme.

[rubl]

The Bangkok Post is reporting that the government are going to help out people who can't pay loans in the First Car Buyers scheme.

That's why I pay taxes in Thailand