Thai lenders cut loan-to-value ratios
Mortgage criteria in Thailand is becoming tighter in a bid to reduce debt levels in the country. Loan-to-value ratios will be cut to prevent speculation amid an economic slowdown and high household debt, the Bangkok Post reported. Several banks have already made moves to tighten criteria, including the United Overseas Bank (Thai) (UOBT), affecting the ease with which buyers of Thai property can secure finance.
UOBT has lowered its loan-to-value ratio to 80 per cent from 90 per cent for residential real estate priced at ten million baht (£212,520) or more, the newspaper revealed. Kasikornbank has also tightened rates to between 75 per cent and 80 per cent from 90 per cent to 95 per cent for third-home borrowing. Meanwhile, TMB Bank has cut loan-to-value rates to 70 per cent from 90-95 per cent for second mortgages and holiday homes.
This follows warnings from the central bank over the risk arising from household debt. Property bubbles were also developing in some areas of the country - a worrying sign for the market and the economy. In fact, the Bank of Thailand had already introduced a compulsory minimum loan-to-value ratio on mortgages, which has been in place since 2011. This was designed to stop the property market overheating and prevent saturation.
With Spain just one European country where overly free lending led to a housing bubble and oversupply, it seems Thailand has certainly learnt a lesson. Tightening lending criteria should help to ensure the market remains sustainable, particularly in areas of high demand. Condominiums in downtown Bangkok are a prime example of this, with the CBRE claiming more and more investors are setting their sites on residential real estate in the area.
In 1988 there were just 10,000 condominium units in Bangkok but today there are over 350,000. "With continuous supply coming onto the market, the condominium market will become even more complicated and competitive," the CBRE wrote. However, under current conditions, a healthy low volume and high value market is expected in the future.
UOBT has lowered its loan-to-value ratio to 80 per cent from 90 per cent for residential real estate priced at ten million baht (£212,520) or more, the newspaper revealed. Kasikornbank has also tightened rates to between 75 per cent and 80 per cent from 90 per cent to 95 per cent for third-home borrowing. Meanwhile, TMB Bank has cut loan-to-value rates to 70 per cent from 90-95 per cent for second mortgages and holiday homes.
This follows warnings from the central bank over the risk arising from household debt. Property bubbles were also developing in some areas of the country - a worrying sign for the market and the economy. In fact, the Bank of Thailand had already introduced a compulsory minimum loan-to-value ratio on mortgages, which has been in place since 2011. This was designed to stop the property market overheating and prevent saturation.
With Spain just one European country where overly free lending led to a housing bubble and oversupply, it seems Thailand has certainly learnt a lesson. Tightening lending criteria should help to ensure the market remains sustainable, particularly in areas of high demand. Condominiums in downtown Bangkok are a prime example of this, with the CBRE claiming more and more investors are setting their sites on residential real estate in the area.
In 1988 there were just 10,000 condominium units in Bangkok but today there are over 350,000. "With continuous supply coming onto the market, the condominium market will become even more complicated and competitive," the CBRE wrote. However, under current conditions, a healthy low volume and high value market is expected in the future.
PUBLISHED : 17TH JULY 2013
