Property sector lauds LTV ratio rule delay
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The property sector cheered the announcement by the Bank of Thailand yesterday of a one-year delay to the planned implementation of the loan-to-value (LTV) ratio rule for low-rise residential purchases. The delay was aimed at alleviating the financial bur
To help people obtain loans for house repairs, the central bank also stipulated that the risk weight of such lending be only 35 per cent of loan value. This would stay until the end of next year.
About 40 per cent of 2.4 million houses in Bangkok and about 40 per cent of 4 million houses in Nonthaburi, Pathum Thani, Samut Sakhon, Samut Prakan and Samut Songkhram have been hit by the floods, according to information given to the central bank. Each unit requires about Bt50,000-Bt100,000 for repairs.
Prasert Taedullayasatit, Pruksa Real Estate director and chief business officer, said this was a good sign for those who buy low-rise residences at a time when the market is facing negative impact from the floods.
“When home-buyers can get a mortgage of 100 per cent of residential value, that increases their purchasing power to buy the residence,” he said.
He added that the market would also see this policy as a positive sign.
Housing Business Association president Issara Boonyoung said his association, the Thai Condominium Association, and the Thai Real Estate Association had submitted a letter to the BOT on November 7 seeking a delay in implementing the LTV ratio as planned on January 1, because of the severe flooding. “The postponement of implementation of the LTV ratio to 2013 is a good sign for people to buy homes and also great for the property market next year,” he said.
The BOT had originally planned to implement the rule on January 1. It would have required banks to lend no more than 95 per cent of home value. This would have been applicable to low-rise houses valued at below Bt10 million. The central bank last January 1 had also imposed a maximum 90 per cent LTV ratio for condominiums priced below Bt10 million.
“The central bank’s Financial Institutions Policy Committee is aware of this problem. For many, the floods may result in a need for home repair,” said senior director Somboon Chitphentom. He added that the delay would benefit lenders, as mortgage growth is below commercial-loan growth.
