On October 21, 2021, the Bank of Thailand (BOT) announced the relaxation of rules for home loan and top-up loan by temporarily lifting the loan-to-value (LTV) ratio to 100 percent, from now until the end of 2022. KResearch views that this relaxation of LTV regulations will help to increase homebuyers' purchasing power and serve as a marketing tool for real estate developers to boost sales. Nevertheless, home sales will still depend on two principal elements: consumer confidence towards an economic recovery and potential buyers' readiness. Meanwhile, the residential market and financial institutions' home loan approval rate will continue to face multiple challenges for the rest of 2021 and going into 2022.
If the Thai economy shows signs of improvement with the abatement of COVID-19 and mild domestic inflation, the relaxation of LTV regulations will help to gradually boost residential market growth during 2022. KResearch has assessed that the transfer of property ownership throughout the duration of these regulations will increase by THB18-30 billion from the base-line scenario in which no such regulations were passed.
Likewise, the easing of LTV regulations will likely lead to higher home loan growth in 2022. Preliminarily, KResearch has assessed that such relaxation would help to boost home loan growth by around 0.3-0.7 percent, to a range of 4.8-5.2 percent – which is higher than the projected 4.2-4.5 percent for 2021. Concurrently, close attention should be paid to consumers' readiness to apply for new home loan and/or refinance their existing debt. Moreover, focus should be on borrowers' credit risk and debt servicing ability which would be impacted by increased debt burdens post-COVID-19, as well as the issues of reduced income and employment that has yet to return to normal levels. Under these circumstances, conditions for home loan approval will vary for each debtor depending on the aforementioned factors.