To prevent property bubbles in the real-estate sector, the Bank of Thailand has asked commercial banks to set strict conditions for property loans, while considering changing the loan-to-value (LTV) ratio to require a higher down payment for purchase of a second home.
Thailand property firms said such a measure would likely have little impact on the overall market, but the BOT should make its intentions clear.
BOT Governor Prasarn Trairatvorakul has said the extension of property loans has reached a risky level and there is concern that property-sector bubbles could arise.
Currently, the BOT obliges commercial banks to maintain the LTV at 95% for low-rise homes, both townhouses and detached houses, and 90% for condominiums.
A source close to the central bank said it was considering changing the required LTV for a second home to between 70 and 80% - in other words, obligating a down payment of 20-30% of the contract value.
This would affect homes priced lower than Bt10 million, while currently commercial banks set LTV at 80% for homes costing more than that amount.
However, Luxmon Attapich, Asian Development Bank senior country economist in Thailand, said the ADB had not seen any sign of bubbles in the Thai property sector yet as the price index for residential units was not high.
Srettha Thavisin, president of leading property firm Sansiri, said that if the LTV measure focused on second homes it would have little impact because most home-buyers in this category paid cash rather than borrowing from a bank.
"However, the BOT has to be clear about whether it will impose this measure or not, because rumours about it could cause potential home-buyers and investors to panic," he said.
Pruksa Real Estate chief business officer Prasert Taedullayasatit suggested that if the BOT is worried about speculation in the condominium market, it could coordinate with the Office of the Consumer Protection Board to impose a fee for changing a home-ownership contract.
Currently, purchases of second homes account for about 20% of the total market value of Bt300 billion a year. Nearly half of those purchases are by investors seeking rental income, and the rest by speculators who pass the homes on to new buyers, he said.
Research by Asia Plus Securities found that if the BOT increased the LTV requirement to control speculation it would help keep the property market healthy but would have an impact on property firms' financial results.
"We suggest that if the BOT does increase the LTV requirement, it does so only for new projects, not existing ones, to reduce the direct impact on the financial results of property firms," the research said.
Asian Property Development chief financial officer P Pumipat Sinacharoen said that if the measure focused only on second homes, that would be preferable to increasing required down payments for the whole market. "Currently, we require down payments of 10-15%. If that is increased to 20%, that will have little impact on our customers," he said.
The residential price index last year increased by 5% from 2011, according to research by the Real Estate Information Centre.
This is close to the inflation rate and no higher than estimated, the research said.
Adisorn Sermchaiwong, senior executive vice president for retail banking at CIMB Thai Bank, said it would be more cautious on approving mortgages after the central bank repeated its concern over a possible bubble in the property market.
Siam Commercial Bank, the largest mortgage lender among commercial banks, earlier estimated that its mortgages this year would grow by 9%, while it aims to secure a market share of 30%.