Property sector affected by first-time car buyer scheme

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Property sector affected by first-time car buyer scheme

Senior banking officials with Krung Thai Bank (KTB) and Kasikorn Bank have suggested overall adverse economic conditions closely allied to the first-time car buying scheme have begun taking their toll on the property sector.

KTB noted that 15 percent of applicants for home loans were rejected by bank assessors in the first two months of this year, although this was only one or two percent more than the same time frame in 2013.

The prime reason the home loan applications were rejected was that most people were involved in automotive financing. Bank assessors noted that people were faced with paying the finance on their new cars and simply would not have sufficient funds left over to service a home loan as well.

Nonetheless, KTB and Kasikorn are looking at ways of trying to ease the financial burden, asking property developers to help by possibly extending the transfer period by three to six months to give those who had placed an order for a property time to make a few extra payments. This would then reduce the amount being asked for from the bank, and may allow people to finally secure a loan. These suggestions are supported by other major bank officials, including the peak Bangkok Bank.

KTB are preparing to offer self-employed home buyers a reduction in monthly repayment rates, from 6,000 baht to 5,000 baht on a one million baht loan. This is the level currently offered to those employed in the civil service.

Nonetheless, KTB said they had extended new housing loans worth 12 billion baht in January and February this year and believes that by the end of the year they will have funded new home loans to the tune of 60 billion baht. This would be five billion baht more than KTB loaned in 2013, an eight percent increase at a time when many are claiming Thailand could potentially slip into a recession.

The Kasikorn Research Center has also said its analysts have revised down their economic growth forecast, mainly because of the political crisis. They believe the crisis is unlikely to be resolved before the second half of the year and so they believe economic growth will drop to between two and three percent for 2014.

All these factors and indicators lead to a negative consumer sentiment in the short to medium term, and this impacts home and condo sales. While home loans for condo units jumped to 25 percent of the total lent by KTB for the first two months of the year (up from 20 percent in the same period in 2013), condo projects in the provinces have been experiencing sluggish transfer rates, especially compared with those in Bangkok.