BANGKOK (Reuters) – Thailand’s central bank said on Thursday it has relaxed loan-to-value rules starting in May until June next year to support the ailing property sector, a measure it said would not pose significant risks to financial stability.
Developers have sought government assistance for a sector that has been grappling with weak demand, oversupply, stringent home loan criteria and soaring household debt levels.
“The real estate sector is slowing down continuously with no clear signs of recovery,” the Bank of Thailand said in a statement.
The new loan-to-value limit – the percentage of a property’s value that can be given as a loan – will be 100% for all housing contracts, the central bank said, up from 70% to 90% currently. Presently, this limit applies only for first-home contracts of less than 10 million baht ($297,265).
The central bank expects that an easing of the loan-to-value rules will help address the issue of high supply and support related businesses, but might have only a limited impact on boosting the economy, which has recovered slowly since the pandemic.
As of September 2024, Thailand’s household debt was 16.34 trillion baht ($486 billion), or 89.0% of GDP, one of the highest levels in Asia and a drag on consumption and growth. The central bank on Wednesday said solutions for tackling household debt must ensure good financial discipline.
The central bank on Thursday said risks to financial stability from the new mortgage policy should be minimal as the current financial situation is tight and financial institutions are cautious on lending.
In 2024, home loans dropped by 13.4% year-on-year to 587 billion baht, while the value of nationwide residential property transfers declined by 6.3%, according to the Government Housing Bank.
Finance Minister Pichai Chunhavajira earlier on Thursday said the government was planning to announce a reduction in transfer and mortgage registration fees within a month to support the sector, a key economic engine.
“This engine is large and hasn’t been fully operational for over 10 years,” Pichai told reporters.
A cut on ownership transfer fees and mortgage registration fees to 0.01% for houses valued up to 7 million baht ($208,395) ended last year.
Pichai said he is also exploring ways to manage borrowers’ bad debt of less than 100,000 baht ($2,977), primarily consumer debt, which he said would require a minimal budget, just management costs and would not burden the government.
($1 = 33.6400 baht)
(Reporting by Orathai Sriring, Thanadech Staporncharnchai and Kitiphong Thaichareon; Editing by Martin Petty)
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