Home loans are expected to show slower growth
The top three residential mortgage lenders among commercial banks predict growth in the home-loan business will decelerate in 2014 and crawl at a single-digit rate for two years because demand is diluted by the economic slowdown.
Siam Commercial Bank, the largest player, sees no more than 6-per-cent growth in 2014, down from 9 per cent in 2013.
Krungthai Bank, the second largest, also assumed 6 per cent, but Kasikornbank, the third largest, makes a case for the same growth rate in the year by pointing to the upcountry market.
Pikun Srimahunt, first executive vice president and head of the mortgage business at SCB, said the bank did not think the residential market will enjoy growth in 2014, based on a drop in launches.
The upcountry housing market should not expand after posting growth of 20 per cent because people have already used funds for the next two years to buy a home last year in response to aggressive marketing by big developers.
"Booking cancellations or delayed transfers will be seen in 2014 because consumers are not confident in the economic situation," she said. The slight growth in housing loans in 2014 will come from projects that were bought in 2013 for transfer next year, especially condominium projects in the provinces.
Chatchai Payuhanaveechai, secretary-general of the Housing Finance Association and executive vice president of KBank, said the bank believes that housing loan growth will maintain the pace of 9-9.5 per cent this year, as many property projects upcountry will still be started.
KBank will focus more on the provincial market to expand its residential mortgage portfolio by 8 per cent in 2014.
Developers from Bangkok that had moved into the provinces ahead of urbanisation and the Asean Economic Community have learned that condos are not the choice of consumers upcountry except at tourism centres.
Many developers are adapting by launching townhouses and single family homes. The low prices of land allow developers to offer reasonable prices for their projects to attract buyers in the provinces.
Rural urbanisation has driven home-loan growth to 40 per cent from 30 per cent in recent years.
Demand and supply has become balanced after supply outstripped demand for many years because of the maturing of the Bangkok market. The surging land prices in Bangkok have made developers shift from condo projects to building townhouses and single family homes.
Sales of residential units will remain at 110,000 in 2014, of which 70,000 will be from condo projects, down from 80,000 last year.
The economic slowdown has forced customers to be more cautious about buying durable goods. Some consumers cannot afford to purchase residences because they are already stretched to the limit paying off debt from buying vehicles under the first car scheme, plus residential prices are continuing to rise.
Weidt Nuchjalearn, first senior executive vice president of KTB, said the key driver in 2014 will be the upcountry market, especially border and tourism provinces.
When the debt service ratio is low, that means quality buyers will be fewer, so lenders might use "pricing" to try to capture customers.
The strategy of several banks, including KTB, will be to join forces with big developersin offering exclusive conditions to buyers of residential projects that KTB financed the projects.
KTB will strongly tap the residential market in the provinces since it is robust, compared to the Bangkok market. In 2014, it expects to drive its housing loans from the provinces to 40 per cent of the total, up from 30 per cent in 2013.
Working with the high household debt and lower purchasing power of provincial customers is a challenge for lenders and the property market, but KTB has set an ambitious growth target of 10 per cent.
Besides joining with big developers, KTB will try to win the payroll accounts of new companies. By tracking the transactions through the payroll accounts, the bank will learn who the targets for home loans are, he added.
SCB aims for growth of 10 per cent in net loans by talking more with existing customers who made overpayments to pay in amount of regular monthly instalments.
New loan bookings at SCB in 2014 will fall to Bt110 billion-Bt120 billion from Bt130 billion in 2013.
When the market is smaller, that means the competition in housing loans will still be intense, Pikun added.