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Low growth seen for home loans: banks

Jan 05. 2012
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By Sucheera Pinijparakarn


Mortgages will likely represent the only segment of the banking sector to show weaker growth this year - the weakest in 10 years, at just 6 per cent - after the flooding seriously affected the purchasing sentiment of consumers.


Chatchai Payuhanaveechai, executive vice president of Kasikornbank, said overall home-loan growth should be no more than 6-7 per cent, because the floods were widespread and hit a lot of housing projects, which generate much of the demand for mortgages.

Chatchai said more demand for new home loans at KBank would be seen in the second half rather than the first six months because it will take time for home-purchasing sentiment to recover.

Most lenders have slashed their growth forecasts for new home loans in 2012 in response to the market situation.

KBank forecasts new mortgages of Bt50 billion, a growth of 8 per cent. That growth will rely on condominiums and housing projects in areas unaffected by the floods. The proportion of its loans for condominiums will increase to 50 per cent from 38 per cent, Chatchai said.

Siam Commercial Bank, the largest mortgage lender among commercial banks, believes the demand for loans for new homes should rebound in the second quarter.

Pikun Srimahun, executive vice president of SCB, said its mortgages this year would fall |to between Bt70 billion and |Bt80 billion from Bt90 billion in 2011.

He agreed that banks needed to shift to housing projects in flood-free areas and condominium projects if they wanted to see growth.

Condominiums are a key focus of SCB, Pikun said. It plans to increase the proportion of condominium loans to 60 per cent from 40 per cent to maintain its hold of 30 per cent of the mortgage market.

She noted that home repairs were another factor that would drive loan demand this year.

KBank, however, believes |that home repairs will not help boost the loan market much because consumers prefer using their savings to fix their residences to reduce their financial burden.

Thakorn Piyapan, execu-|tive vice president of Bank of Ayudhya (BAY), said that without government incentives, the home-loan market would have little chance to grow. In addition, growth will be based on backlogs in existing housing projects and new ones in flood-free areas, he said.

To sustain market share, all banks must focus more attention on housing projects in provincial markets.

BAY will increase its loans for condominiums to more than 20 per cent of the total.

Given the limited supply of condos, the market will see aggressive competition among commercial banks, so BAY will offer mortgages interest-free for the first months of the term.

"We must do all we can to maintain new home loans of Bt26 billion in 2012, the same amount as 2011," Thakorn said.

Tinnakorn Boonyakalin, sen

ior vice president of Krung Thai Bank, |said he expected the market for condominiums to improve, and this could help maintain mortgage growth in 2012.

KTB will try to maintain its new-home-loan target of Bt40 billion in 2012, the same amount as 2011.

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