BOT sees no capital, property worries
The Bank of Thailand (BOT) has found no sign of a real estate bubble, but will keep a close watch on the situation, officials said, adding that no irregularities in capital flows had been reported.
Suchada Kirakul, an economic adviser to the central bank, said the issue has been discussed at internal monthly macro-economic team meetings. So far, there had been no worrying signs, as most residential units had been purchased for own use, with a very low resale rate. Re-selling was found in some provincial areas, however.
"This is the topic of discussion at every macro-economic meeting, based upon our past lessons and lessons learned overseas. Real estate is one of seven indicators [of economic stability]. Our focus is on house prices, land prices and the ratio of purchases to the total number of each project’s units. So far, there have been no worrying signs, but we still need to keep an eye on it," Suchada said.
Aside from real estate, other indicators include trans-national transactions, the financial market, financial institutions, business environment, household financial conditions and fiscal conditions.
Suchada attributed the recent increase in property prices and mortgages partially to low interest rates, as well as the government’s income-stimulus measures. Coupled with the recovery from the 2011 floods, the higher purchasing power has driven up property sales, particularly demand for condominiums.
On capital flows, Singhachai Boonyayoyin, a BOT senior director, said there were no signs of irregularity, as Thailand has witnessed both inflows and outflows.
"The market mechanism is quite balanced now, with clearer supply and demand. There is no irregularity," he said.
He attributed the recent spike in the baht to 30.50-60 per US dollar to higher risk aversion among global investors, who have been encouraged to invest more in risk assets following better-than-expected US economic indicators. This induced investment in Asia, which has led to appreciation in all Asian currencies.
Nonetheless, the baht weakened this week on concerns of a deterioration in the euro-zone crisis. Weakening global gold prices encouraged investors to shift money to gold. As they have to buy dollars for the investment, this pressured the baht.
The Thai currency closed yesterday at Bt30.71 per dollar.
