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Property Market Returning to Normal

By on Mar 10, 2011 in Property News

Source: The Nation, Published on March 2, 2011

The Bank of Thailand is now less concerned about a bubble in the condominium market due to a reduction in oversupply and a slowdown in demand. The impact of its decision to raise the loan-to-value (LTV) ratio, which took effect from the beginning of 2011, is being monitored.

It is too soon to assess the impact of the new LTV ratio but oversupply is much less, easing concerns of a bubble, said BOT senior director Mathee Supapongse.

Last year, the central bank announced a preventive measure by raising the LTV for condominium purchases. For condominium units costing less than Bt10 million, the LTV is capped at 90 per cent, which means loan cannot be more than 90 per cent of unit cost.

“Sales of new projects are not at an accelerated pace and oversupply could be less, which is a good sign. This could be as a result of the recently launched policy. The chance of a bubble is less. This will be monitored further as the measure is being employed from the start of the year,” Mathee said.

The property market has started to give better signal, reflecting lower demand, said BOT director Songtum Pinto. The number of residential units getting credit approvals from commercial banks is projected to decline for all types to 5,793 in January from 9,067 units a month ago, the BOT’s Economic Conditions Report in January said.

“New property projects in the first month were down as the previous stimulus measure encouraged buying of residential units. Now, the situation is more likely returning to normal,” Songtum said. The report said transactions dropped partly due to more new residential projects, making consumers take longer to make the decision to buy.

Property supply was also lower in January due to the postponement in the launch of many new projects, in line with property developers’ forecast about slower future demand.

As of the end of January 2011, commercial banks’ outstanding personal loans for property purchases rose 13.9 per cent from a year earlier while outstanding loans for property developers shrank 3.9 per cent.

In 2011, the property market could grow due to the government stimulus measure – even though it ended on July 1, 2010 – and the low interest rate, the report said.

With Thailand’s economy growing at a fast pace, and high consumer confidence, the transfer of property rights in Bangkok and its vicinity increased to 178,128 units in 2010 from 161,240 a year earlier. The increase is in line with the number of residential units completed and registered in those areas, which increased to 105,152 units in 2010 from 94,977 previously.

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