Thailand scraps mortgage lending cap to support fragile economy

BANGKOK: Thailand’s central bank has temporarily suspended home-mortgage lending limits to revive the sluggish property market and pandemic-hit economy, fuelling a rally in shares of real estate developers.

Home buyers can now take loans equivalent to 100% of the property’s value until the end of 2022, the Bank of Thailand (BoT) said yesterday.

That’s up from a loan-to-value range of 70% to 90% previously, with that ceiling dependent on the type and number of houses purchased.

The mortgage move is aimed at boosting the property sector and related businesses, which account for 9.8% of Thailand’s economy and employ 2.8 million people, the central banks’ assistant governor Roong Mallikamas told a news briefing.

Making home loans easier was the latest in a slew of “targeted measures” unveiled by the central bank in recent months to bolster Thailand’s fragile economic recovery, as it preserves the limited monetary-policy space available after cutting interest rate to a record low of 0.5% to combat the pandemic.

“The outbreak has hurt our economic recovery significantly.

“So, we need to have additional measures to help boost the economy,” said Mallikamas.

“This unlock will help draw excess savings and pent-up demand for property from the medium-to-high income groups.”

A measure of Thai property developers rose as much as 1.7% to its highest level in more than four months.

Origin Property Pcl, Major Development Pcl and Nusasiri Pcl jumped more than 7%.

AP Thailand Pcl gained as much as 6.1%, Pruksa Holding Pcl climbed 6% and Supalai Pcl jumped as much as 11%.

The BoT foresees no risks to financial stability from any increase in speculation in the property sector.

This is because of the strong credit standards of financial institutions and the long-term ability of borrowers to repay debt, it said in a statement.

The move won’t exacerbate the nation’s high household debt either.

This is because it mainly stemmed from personal loans and credit card spending, Mallikamas said.

The higher housing-loan limit, along with other fiscal measures, should trigger new lending of 50 billion baht (RM6.2bil) within one year.

This is about 7% of the 800 billion baht (RM99.6bil) property-market value expected this year across Thailand, said senior director Don Nakornthab.

Other key information from the briefing included the point that the loan-to-value, or LTV, ratio will rise to 100% for the second and third home purchases, which had earlier been capped at 70% to 90%.

The relaxed measures also allowed a 100% LTV ratio for purchases of second-hand housing and home refinancing.

It was also pointed out that without additional stimulus, the property sector would be unlikely to recover to pre-pandemic levels until 2025.

The central bank, on its part, will closely monitor the recovery in the property sector, signs of speculation as well as lending practices.

It was noted that officials would stand ready to adjust measures as needed.

It has been reported that Thailand’s economy is expected to grow just 0.7% this year after a 6.1% contraction last year, according to the central bank’s forecast, with the key tourism sector still stumbling. ― Bloomberg

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