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Published on November 2, 2007

 The changing behaviour of people, many of whom now prefer to live a convenient life in central Bangkok rather than the suburbs, has resulted in a boom in city condominiums and a downturn in single-house projects.

Many property developers must now be very careful in launching new projects, and they find the best strategy for selling their current projects is to join with banks in offering low-interest loans and increase the alternatives for mortgage insurance to protect the loan.

It is already the fourth quarter, and the economic slowdown and political problems still overwhelm consumers worried about their long-term financial stability. This influences them to delay their purchasing decisions. Thus, property developers are working hard to adjust themselves through more marketing campaigns, including offering discounts and giving premiums, which ultimately creates very strong competition within the industry.

Housing Finance Association president Kitti Patpongpibul said property developers were trying to attract consumers who had purchasing power but that they were few in number, because most did not want to spend at the moment.

"Actually, demand exists, but people are waiting to see the political and economic situation and for the possibility of banks decreasing interest rates following the US Federal Reserve," Kitti said.

He believes consumer confidence will recover in these final months of the year if Thailand really does hold a general election and the political situation becomes clearer.

Property developers today must be very careful when launching new projects, due to the credibility of consumers and their ability to pay loans.

Many units that consumers have already reserved have had to be resold, because bank loans for the customers were not approved. If the banks had approved the loans, they could have ended up with additional non-performing loans later.

Government Housing Bank managing director Khan Prachuabmoh said since banks and other financial institutions must be very careful and project developers wanted to accelerate revenue, both partners would have to work together on co-marketing campaigns.

Many campaigns are launched a month before the end of each quarter, including offers of very low interest and special prices for life-assurance packages. These campaigns generate additional costs, but the developers must shoulder the burden.

"Special Low Interest with Relaxed Payment Periods" is the campaign that Lalin Property joined with Bangkok Bank to offer customers.

A Lalin source said many customers had problems with credibility in asking for bank loans, so the campaign should help.

The campaign features two alternatives. First, if customers apply for mortgage insurance, interest for the first year will be 3 per cent, then the minimum lending rate (MLR) minus 0.75 per cent after that until the end of the loan period. For customers who do not apply for mortgage insurance, interest for the first year will be 3.25 per cent, then the MLR minus 0.75 per cent after that until the end of the loan period.

As of May 28, the bank's MLR was equal to 7 per cent per year. The maximum loan was 95 per cent of the housing price but less than 100 per cent of the estimate of the asset's price, and the maximum payment period was 30 years.

The offer was good from June 1 to September 30.

The banks also offer loans for all kinds of residences, including single houses, townhouses, commercial buildings, condominiums, houses that need to be refurbished, even vacant lots for constructing houses.

Mortgage insurance features a life-assurance package that guarantees Bualuang Home Loan customers their families will own the property fully without if anything unexpected happens to them, such as death or disability.

Pumipat Sinacharoen, CEO of Bangkok City Smart, Asian Property Development's property-broker arm, said the market for second-hand homes followed the direction of the new-home market when the economy rose or fell.

As a result, the industry also often sees house brokers launch campaigns, and Bangkok City Smart is one of them. It links to Asian Property's website and also tries to enhance customers' convenience by offering relief from service charges amounting to between Bt30,000 and Bt100,000 if the initial customers can sell their homes to subsequent customers. Selling prices are also not much different from other selling activities done by property developers.

This campaign will end this month. Although it is a short period, it is a good example of how a broker helped its parent company. The company has also joined with Siam Commercial Bank to offer special interest rates for customers who buy furniture to decorate their units in Siam Pathumwan Condo and joined with Kasikornbank to offer home loans to customers who buy second-hand houses or condominiums through the company. Customers will be offered 3.25-per-cent interest in the first year, then MLR minus 0.5 per cent for the rest of the loan period. The company also offers a maximum loan of 90 per cent of the property's price and a maximum payment period of 30 years.

Creating business alliances between property developers and banks not only enhances their opportunities to accelerate their sales volumes, but also enables them to check the credibility of all customers before transferring ownership. This prevents many non-performing loans.

Another interesting strategy is letting customers open accounts at certain banks to create comprehensive financial packages. This increases purchasing power for customers through aggressive interest rates.

Property reporter

 The Nation