Thai central bank eases mortgage rules to aid property sector

[BANGKOK] The Bank of Thailand (BOT) will relax some mortgage rules to revive the slumping property sector amid weak demand and oversupply. 

Lenders will be able to offer a loan amounting to 100 per cent of the property price for a borrower’s first purchase of a residence worth more than 10 million baht (S$395,537), assistant governor Somchai Lertlarpwasin said in a statement on Thursday (Mar 20).

The central bank currently limits the ratio of the loan that banks can provide at 90 per cent of the price, according to its announcement in 2018.

Banks will also be allowed to give a mortgage loan for 100 per cent of the buying price for an individual’s second residential property worth less than 10 million baht, said Somchai. At present, the central bank caps the loan ratio for such property at 80 to 90 per cent of the price, depending on the payment history of the borrower.

The BOT will temporarily apply the relaxed rules to loan contracts that will be signed from May 1 until Jun 30, 2026, according to Somchai.

The property market has been hit hard, as the surge in non-performing loans make banks more cautious about lending. Thailand already has the highest household debt level in South-east Asia. The government previously tried to revive the real estate sector with cuts in property registration and transfer fees. It is facing renewed calls to extend the benefits again. 

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The number of condominiums and houses sold in Bangkok and metropolitan areas last year dropped 37 per cent to about 53,000 units, according to data from the Thai Condominium Association. The number of unsold residential units stood at about 290,000.

The central bank has cut its benchmark interest rate twice in the space of four months to try to bolster the economy. The BOT is expected to cut the rate further, with its rate-setting panel now shifting its focus towards the country’s weakening growth outlook.

A stock index tracking 59 listed property developers gained as much as 1.2 per cent on Thursday following the BOT statement, reversing an earlier loss of as much as 0.6 per cent. BLOOMBERG