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Thailand Property – deposits rise as lending criteria bites

By on Mar 17, 2014 in Property News, Residential

Leading property firms have had to increase the down payments they require from condominium buyers from 10 per cent of a unit’s value to between 15 per cent and 20 per cent, due to tighter bank restrictions on the approval of mortgage applications.  Banks have tightened their lending criteria during a period of high household debt limiting many people’s residential purchasing power.

“We have had to increase our down payments for all condominium market segments to between 15 and 20 per cent, at a time when the commercial banks are restricting mortgage approvals to customers,” said Quality Houses CEO Rutt Phanijphand, who is also president of LH Bank.  LH Bank is limiting housing-loan approvals among its customers due to rising levels of household debt, and because the business risk from lower purchasing power has reduced the ability to repay debt to the extent that non-performing loans are on the increase, he said.  Given the market trend, Quality Houses has to select customers by focusing on real demand by increasing its down payment for condominium units from the legal standard of 10 per cent to 15-20 per cent. This will help customers reduce the mortgage value they have to apply for when the homes are ready to be transferred to them, he added.

Meanwhile, down payments on detached housing and townhouses have also been hiked, from the previous average of 5 per cent – in line with the legal standard – to the current level of 10-15 per cent.  This forms part of the developer’s pre-approval process to reduce the business risk from customers being unable to have their homes transferred after construction is complete, he explained.

Land & Houses president Naporn Sunthornchitcharoen said his company had started to increase the down payments required for its condominiums, detached houses and townhouses early this year, for similar reasons.

A source in the property sector said about 250,000 condominium units would be completed and ready for delivery to customers this year. However, at least 20 per cent may be unable to transfer due to the banks rejecting their housing-loan applications.  Given the prevailing trend, leading developers forecast the residential property market in greater Bangkok will at best be flat, or more likely will contract by between 2 per cent and 5 per cent this year.

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