Bank of Thailand governor Prasarn Trairatvorakul said yesterday that the central bank has repeatedly instructed commercial banks to maintain their mortgage loan standards and shun competition for loans as property prices in some areas will continue to rise.
Siam Commercial Bank chairman Vichit Suraphongchai said the leading property developers survived the country’s property bubble burst and financial crisis in 1997 and their strength will protect the financial market.
“Despite no signs of a property bubble compared to the 1997 crisis, we are closely monitoring the situation amid market concerns and warnings from the central bank,” he said.
SCB, the country’s largest mortgage loan provider with a loan portfolio of more than B400 billion, has cancelled zero-rate mortgage loans offered to the public to prevent speculation in the booming property market. However, the bank still offers zero-rate mortgages to selected projects.
CIMB Thai Bank has also become more prudent about extending mortgage loans.
Despite a 10 per cent growth in its mortgage loan portfolio so far this year, this is considered the normal rate for smaller banks with outstanding mortgage loans of B30 billion and a mere 1-2 per cent market share, said CIMB Thai Bank executive vice president Adisorn Sermchaiwong.
Kasikornbank has put the brakes on extending loans to some risky assets, such as unsecured loans amid rising household debts and signs of speculation in property and stock prices. KBank chief executive officer Banthoon Lamsam said such practices would be compatible with long-term asset quality.
The bank’s total loan growth target of 10 per cent this year is in line with the country’s economic growth and is good risk management practice, he added.
However, real estate services firm Jones Lang LaSalle (JLL) has pooh-poohed the caution.
Suphin Mechuchep, JLL managing director said this week, “There have been no clear signs of a bubble in Bangkok’s condominium market so far.”
He added: “A real estate bubble can occur when there is excess demand from speculative buyers along with abundant liquidity through borrowing, driving property prices to levels well above their fundamental economic value.
“Bubble conditions can also be caused by developers undertaking development without proper market studies and planning, leading to overbuilding. However, our close monitoring of Bangkok’s core and central condominium market shows that these conditions do not presently exist.”
Despite the strong growth of new supply, prices of condos in both completed buildings and off-plan projects in Bangkok continue to rise, JLL noted.
However, it said, price increases have been gradual and largely driven by sustained demand, improvements in product quality and offerings, and rising development costs.
While it is hard to identify the actual percentage of speculators in the condo market, the consensus is that some projects by leading developers attract a considerable number.
These projects include those in the upper-mid-price segment in prime locations, which show high potential to appreciate in price when construction is near completion.
However, such projects are generally few and far between, JLL said, as actual profits on changes in condo prices are unlikely to lure strong speculative demand.
Overall, most buyers are end-users who buy the property for their own use or investors looking for an income-generating asset, the company argued.
– Bangkok Post/JLL