Thailand banks told to tighten lending

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It’s probably the last thing that Thailand property developers and real estate agencies will want to hear.

The Bank of Thailand has expressed its concern at the growing number of mortgages being granted, and has urged banks to maintain “good” risk management practices.

This could easily be interpreted as suggesting that banks reduce the number of mortgage applications that are being approved.

Media reports in Thailand have suggested that some banks have been offering a higher loan-to-value (LTV) mortgages to homebuyers, possibly to attain a larger market share.

According to Bank of Thailand data, lending through housing loans grew by 5.8 percent year-on-year between January and March, compared with 5.5 percent in 2017. Mortgages accounted for 16.8 percent of total lending by commercial banks during the first quarter.

Any tightening of mortgage lending facilities will be bad news for Thailand’s property and real estate sector, especially at a time when buyers are still making relatively low down-payments, sometimes as little as 5 percent, for off-plan properties and waiting for two or three years to obtain mortgage finance to complete to sale.

There is still a large number of property listings in Thailand where down-payments for off-plan properties approaching completion are being touted for sale.

The reason for this is because buyers, or in these cases speculators, are unable to obtain the finance to complete the purchase.

Developers, especially, need to monitor the level of mortgage rejections closely and, if necessary, adjust their new launch plans accordingly.

Few Thai property buyers buy their chosen unit outright using cash. Agents suggest as many as 80 percent of Thai buyers will use some form of lending in their property purchase.

Andrew Batt
The author of this article is Andrew Batt, the founder and editor of Andrew has been writing about property and real estate issues in Thailand and Southeast Asia for more than 10 years. He has worked for PropertyGuru Group, DDproperty, Dot Property Group, Hipflat and AsiaRents. He has also produced content for leading Thailand property developers and real estate agencies.

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