THE PAVILIONS PHUKET BRITISH INTERNATIONAL SCHOOL, PHUKET Kata Rocks
Login | Create Account Poll Currency Weather Facebook Youtube Search

Speculative condo promotions come under scrutiny

BANGKOK: The Bank of Thailand will hold a consultation to discuss the ‘search-for-yield’ behaviour prevalent in the property sector with relevant parties because it could lead to higher risk of default in mortgage loans.

constructioneconomicspropertytourism
By Bangkok Post

Sunday 30 September 2018, 10:00AM


A high-rise condominium model is exhibited at a housing fair. The central bank says search-for-yield behaviour is rampant in the property sector. Photo: Bangkok Post / Jiraporn Kuhakan

A high-rise condominium model is exhibited at a housing fair. The central bank says search-for-yield behaviour is rampant in the property sector. Photo: Bangkok Post / Jiraporn Kuhakan

The central bank found the behaviour is widespread, especially in high-rise condominium projects, said BoT Governor Veerathai Santiprabhob.

Such behaviour reflects an oversupply in some condo areas, resulting in artificial demand and higher non-performing loans (NPLs) in the mortgage segment, said Mr Veerathai.

“We also found several marketing campaigns for residential projects are promising cashback, high rental yields or other [incentives that create artificial demand]. These are search-for-yield and speculative behaviours, and the central bank will discuss controlling risk with related parties,” he said.

“If a macro-prudential measure is needed to supervise mortgages and control search-for yield behaviour, we will announce it officially.”

Mortgage NPLs rose to 3.39% in the second quarter, up from 3.38% registered in the previous quarter, according to central bank data.

The central bank has used a micro-prudential measure by informing financial institutions to tighten mortgage loan approvals under the basis of good risk management.

Earlier, the central bank raised concerns over higher competition in the housing loan market, especially higher loan-to-value (LTV) offered for mortgage loans.

The central bank’s Monetary Policy Committee and Financial Institutions Policy Committee previously reported after a joint meeting that there was a higher ratio of new mortgages, with LTV rates exceeding 90%.

BRITISH INTERNATIONAL SCHOOL, PHUKET

The increasing loan-to-income proportion and deteriorating mortgage loans all point toward fragility in the residential property market. Under the financial regulator's guidance, the LTV ratio is set at 90% for low-rise residential projects and 95% for high-rise projects.

Separately, Nathapol Luepromchai, executive vice-president and head of mortgage loans at Bank of Ayudhya, said banks have discussed and shared information about the search-for-yield behaviour during meetings at the Thai Institute of Banking Finance Association.

Each bank has prevented risk exposure by tightening loan approvals for what it deems as artificial demand, said Mr Nathapol.

If the central bank holds a consultation, this would facilitate information-sharing between the financial regulator and banks as a means to control risk, which would benefit the overall property industry as well as homebuyers, he said.

“After seeing such behaviour for around a year, it would be reasonable for the [central bank] to implement a macro-prudential measure, setting an exact LTV ratio rather than [providing] guidance,” said Mr Nathapol.

Rising mortgage NPLs are a result of an artificial demand and speculation rather than economic conditions, he said.

Read original story here.

 

 

Comment on this story

* Please login to comment. If you do not have an account please register below by simply entering a username, password and email address. You can still leave your comment below at the same time.

Comments Here:
Comments Left:
# Characters
Username:
Password:
E-mail:
Security:

Be the first to comment.

Have a news tip-off? Click here

 

Phuket community
Police warn of more Veg Fest traffic jams in Phuket Town

Mr.K,Phuket isn't the only place in the world where traffic delays occur during festivals. You ...(Read More)


Blockbuster drug haul worth over B2bn in Chiang Rai

Well done,RTP. Mr.K,have you ever thought about that those factories possibly are in Myanmar ? There...(Read More)


No evidence to back claim of Koh Tao rape, say police

All baloney-nothing but a white-wash. This was a pathetic PR mission to the UK to discredit the girl...(Read More)


Police warn of more Veg Fest traffic jams in Phuket Town

First 'we' create a traffic mess and long delays on Phuket main roads when people drive to g...(Read More)


Patong raid nets more than 4,000 items of fake-brand clothing

Looks like Khun Prasarn and Khun Siriphong refused to turn in their brown envelopes this month. Funn...(Read More)


Patong raid nets more than 4,000 items of fake-brand clothing

Guess, after raiding 2 stalls the police truck was full, not able to target more stalls. On the othe...(Read More)


Blockbuster drug haul worth over B2bn in Chiang Rai

Let's hope that during transport from Chiang Rai province not a few fertilizer bags felt of the ...(Read More)


Suvarnabhumi’s new terminal designer set to sue

Is this that not fire proof wooden design ( what can not be cleaned) for which many thai trees have ...(Read More)


One dead in ‘Phoenix’ salvage operation

Jor,as the saying goes: The wiser head gives in ! Better to allow R2 to have the final words or he w...(Read More)


 

Melbourne Cup 2018