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Property Bubble Set to Form at Low end of Thai Market

A majority of mortgages are at the low end of the Thai market and increase the risk of a bubble forming in this segment, partly because of euphoria over the forthcoming Asean Economic Community.The mortgages are to set a new record of 21 to 22% of Thailand’s gross domestic product (GDP) over the next two years, reported Live Trading News.

Markets have been unsettled due to a recent warning from the Bank of Thailand about growing household debt.

Higher household debt has been largely attributed to the Yingluck Shinawatra administration’s policies, including the tax rebate of up to THB100,000 (US$3,416) for first-time car buyers.

The time interval between new loan extensions and the period by which loans are counted as NPLs has contributed to a rise in non-performing loans.

When the current low interest rate grows it could stress budgets, even though mortgages may look reasonable at present. As interest rates rise over the next five years the value of these properties may drop.

However, in the mid to high end sector demand is continuing to rise, with occupancy rates remaining high and valuations remaining attractive.

There is no property bubble is on the horizon for tourist destinations like Pattaya and Phuket, according to Live Trading News.

Last modified onWednesday, 27 March 2013 02:06
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