By Nikki De Guzman:
In an effort to prevent a property bubble, the Bank of Thailand (BOT) has instructed commercial lenders to set strict rules for housing loans. It also plans to lower the loan-to-value (LTV) ratio for second-time buyers.
Commercial lenders are currently required to maintain an LTV ratio of 90 percent for condo units, and 95 percent for low-rise homes, townhouses and detached residences.
However, the central bank is mulling to slash the LTV ratio for second-home purchases to between 70 percent and 80 percent. This means home buyers will need to fork out a down payment of between 20 percent and 30 percent of the contract value, according to a source close to the central bank.
The move will likely affect houses priced under THB10 million, as properties costing more than that amount already have an LTV ratio of 80 percent.
The LTV measure on second-home purchase is also expected to have little effect as most buyers within this category pay in cash, said Srettha Thavisin, President of real estate firm Sansiri.
At present, second home purchases account for about 20 percent of the total sales volume each year or THB300 billion – from which half of the deals are accounted for by investors looking for rental income, while the rest comprise speculators who flip properties.
Meanwhile, a study by Asia Plus Securities revealed that lowering the LTV ratio to curb speculation would keep the country’s real estate market healthy. However, it would negatively affect the earnings of property firms.
“We suggest that if the BOT does increase the LTV requirement, it does so only for new projects, not existing ones, to reduce the direct impact on the financial results of property firms,” said the research.
Nikki De Guzman, Junior Reporter at PropertyGuru, wrote this story. To contact her about this or other stories email nikki@allproperty.com.sg
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