Thai Banks Tightening Credit For Hotel And Property Sectors

Posted: 16 Nov 2010 | 6:00 am

The Bank of Thailand's announcement on tightening the lending regime for end user real estate loans has triggered concern in the property sector.

With rising fears of a market bubble the Government institution has made public plans to impose new guidelines for mortgages aimed at increasing risk reserves by a significant amount.

Given that resulting costs will impact the banks a domino effect for interest rates to go up is anticipated. This is expected to subdue some of the widespread speculations in the domestic market especially for the surging supply line of entry level condos.

Some estimates place Thai property's contribution to GDP as high as 7-8%, with the contribution to the wider economy running into double digits adding the expanding contribution in household goods and related services.

Property firms listed on the SET (Stock Exchange of Thailand) have recorded a high level of dividend payments consistently in the past few years and the emerging Property Fund sector provided exceptionally strong investor returns.

Mounting concerns on possible volatility have seen lending policies at an increasing number of banks include hospitality assets such as hotels which are increasingly being viewed as risk positive given the political machinations this year and external events which impact tourism and business travel.

For now questions over consumer credit and challenges in debt formation could create a strong obstacle for businesses rolling into 2011.

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