Lenders getting even tighter on housing

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Lenders getting even tighter on housing

The housing market may well appear quite buoyant with prices per square metre in some of Bangkok’s most affluent and popular districts surging, but stricter regulations on mortgage finance by the major banks are now starting to take their effect.

A senior business development officer with Property Perfect, a Stock Exchange of Thailand (SET)-listed company, was quoted as claiming the local housing market has been weakened in the second half of 2013 due to stringent new mortgage rules instituted by the major banks in an attempt to rein in growing consumer debt.

Property Perfect believes these tough rules will impact the housing market well into 2014 unless they begin to relax their rules.

Interestingly, the market most affected by the banking regulations are those within the one to three million baht range. In other words, the banks are being far tougher on approving loans to those who might be classed in the lower middle-class stratum. These people might well have solid employment, but it is likely they are already heavily stretched in terms of simple living expenses and a possible, even probable, new car loan.

According to Property Perfect the tighter regulations have seen their rejection rate for potential customers jump from between seven to 10 percent in 2012 to 15 percent this year.

Even so, the company believes 2014 could still prove to be better than expected as they believe the consumer debt burden will ease, and this should mean the commercial banks start to loosen their purse strings. They also cite the current political protests across the country as reviving the spectre of the unrest of 2010 and are making consumers nervous about investing in big-ticket items such as houses.

They believe once the political issues are settled, a seemingly optimistic view given the deep-seated divisions becoming ever more evident across sections of society, then consumer confidence will again return and local people will start investing again.

During the first 10 months of 2013, Property Perfect racked up 9.5 billion baht in housing sales and they expect to notch a strong 13 billion baht by the end of the year.

Admittedly, this is down from a previous projection of 17 billion baht they announced in July, but this was due to some projects being postponed until 2014.

Property Perfect recently held a showcase of its prime condo projects at CentralWorld, featuring 10 examples worth a combined 12.7 billion baht. The projects are all in the greater Bangkok area and Hua Hin, and priced to suit almost any budget, starting as low as 1.2 million baht and rising to around 12 million baht.