Property developers beg central bank to modify loan-to-value ratio
Fears grow that the slumping property market will severely affect building contractors and construction material suppliers
Property developers are begging the Bank of Thailand to relax its loan-to-value (LTV) ratio measure and commercial banks to further reduce the interest rate for housing loans to save the property sector as it continues to contract and before it starts to affect other related businesses, such as construction materials and contractors.
The LTV is a risk assessment ratio that lenders examine before approving a loan. For example, the sum approved as a loan for homebuyers will depend on their income and credit history. This measure was introduced to control non-performing loans.
Pornnarit Chuanchaisit, president of the Thai Real Estate Association, said on Thursday that the third quarter of 2024 was the lowest point of the property market, although it would probably not drop any further now that the BOT has approved a policy rate cut to 0.25%.
“After the rate cut was announced last month, commercial banks started to drop their loan interest rate by around 0.125%,” he said. “However, this should be brought down further to eliminate obstacles hindering homebuyers from obtaining loans.”
Pornnarit also urged the BOT to ease the regulation under the LTV measure which requires buyers of 2nd and 3rd homes to place a down payment of 20-30% of property prices, by suspending it for a year to allow more capital to be injected into the property market.
Soothorn Sathaporn, president of the Housing Business Association, added that despite the decrease in the interest rate, the rejection rate of housing loans from commercial banks is still high, at around 60-70%.
“This has prompted developers to hold off on launching new projects, resulting in a decline in investment and is already starting to affect small businesses in related sectors, such as construction material providers and contractors,” he said.
Earlier, Deputy PM and Finance Minister Pichai Chunhavajira said that he would meet with the Thai Bankers Association today (November 1) to discuss measures to help the property and automotive sectors that are suffering from the high rejection rate of loans.
Pichai added that his ministry would propose to next week’s cabinet meeting a range of stimulus measures for the property sector, including a 55-billion-baht loan programme for buying and renovating houses and condominiums.
