The Ministry of Finance will present to the Cabinet in the next week legislation that will support low to moderate income people by allowing the Government Housing Bank (GHB) to issue 30-year loans with the first two years being interest free on properties that are priced at three million baht or less for first-time buyers. This policy is indicative of the government’s plan to encourage people to buy their own housing which it feels will help solve social problems. Because the housing market at or below three million baht is a big market and the buyers are mostly middle class this represents a market share of about 70% of consumers.
Real estate entrepreneurs mostly agree with this policy because it helps consumers in an era where living costs have increased and rising interest rates are helping real estate industries. Operators with pending sales waiting to transfer in the market each year are worth over 2 billion bahtThis loan program will certainly affect the bank’s lending because banks currently have 0% interest loans available for a maximum of six months or one year only.
It is expected that in the second quarter private banks may lose some new customers because of this program, so it is believed that they will initiate new campaigns to compete with the GHB.In addition to paying 0% interest for 2 years, potential clients will also be able to get an exemption from the 1% mortgage fee and 1% transfer fee. This particular measure, along with allowing the conversion of leases to purchases for housing priced at not more than 1.5 million baht should consume the entire GHB budget for this project which is five billion baht.
From data provided by the Thai Real Estate Valuation and Data Center it appears that real estate projects opened in the first quarter of 2011 for homes priced from 500,000 baht up to 3 million include approximately 21,347 units that are worth approximately 32,405 million baht.
Included in these amounts are condominiums that account for up to 10,917 units worth 13,461 million baht, houses numbered at 2,013 units that are valued at 5,260 million baht, duplexes at 590 units valued at 1,178 million baht, townhouses at 7,548 units valued at 4,307 million, commercial building at 270 units worth 524 million baht and land allocation valued at 2 million baht.
However, the government already estimated that there are some borrowers applying in advance and there are only 1.5 billion baht left from a total of 2.5 billion baht which will be used up in two weeks time. It shows that this measure may not affect the release of units on the market at all. Using a market stimulus measure in time without a crisis may be unnecessary and if crisis arise in the future it not will be useful to use this measure to ease the problem.The cabinet had approved the 0% interest rate for two years for first-time house lending programs with a limit of 2.5 billion to stimulate real estate market.
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