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Mortgage lenders take different strategies to

The top three mortgage lenders have mixed views on how to revive growth for the rest of the year after they witnessed a double-digit decline in housing loans in the first quarter compared with a year earlier.

Siam Commercial Bank, the largest mortgage lender among the commercial banks, reported a 30-per-cent plunge in home loans in the quarter, but it is maintaining its full-year new-loan target of Bt100 billion.

Pikun Srimahunt, first executive vice president, said SCB would put more emphasis on condominium projects as about 70,000 condo units are set to be transferred to buyers this year, representing total value of Bt140 billion. These are condos in projects that have been launched over the past one or two years whose construction will be completed this year, she said.

Up to now, SCB has not been very active in providing loans to condominium buyers, with such mortgages accounting for only 15 per cent of the total over the past few years. But Pikun thinks half of new loans this year will be for condominiums, which are now a key driver of SCB's loan growth.

She said several other banks also aimed to tap into the condominium segment, and as the market is limited, the competition was expected to be intense.

Moreover, mortgages carry low risk for banks compared with unsecured loans, so they have focused more on this segment.

"We will tap condominiums in the B-plus segment, those priced around Bt2.5 million, as buyers in this segment are low-risk," she said.

SCB expects its home loans this year to grow by only 5 per cent, compared with 19 per cent last year. Outstanding loans in 2013 totalled Bt485 billion.

Krungthai Bank, the second-largest mortgage provider, which faced a 25-per-cent loan drop in the first quarter, is less enthusiastic about the condominium segment than SCB, as it is concerned about oversupply. But it will grant loans to buyers in this segment if the projects are owned by leading property developers to ensure the low risk, said Weidt Nuchjalearn, first senior executive vice president.

However, the bank is more interested in the property market in the Northeast, because the economy in provinces in that region is expected to grow sharply thanks to China's high-speed railway running from Kunming to Vientiane in Laos.

Previously, Chiang Rai and Chiang Mai provinces were expected to benefit from China's high-speed railway system because it would have to traverse Thailand's Northern region to link up with this country's own high-speed rail system, one of the projects under the Bt2-trillion infrastructure programme. But after the Constitutional Court shot down that programme's budget bill, China changed its priority to a rail link with the Laotian capital.

"The Northeast is where the future growth is for our mortgage business. However, looking at the housing-loan results in the first quarter, and if the political deadlock is unresolved, we might review our new-loan target," Weidt said.

Outstanding housing loans at KTB are between Bt270 billion and Bt280 billion.

Kasikornbank, the third-largest housing lender, is optimistic that the mortgage business will resume in the second half after lending activity in March improved. Despite a slow first two months, KBank ended the quarter only Bt1 billion short of its new-mortgage target of Bt10 billion.

Chatchai Payuhanaveechai, executive vice president of KBank, said it had focused on detached-housing projects more than condominiums, and around 70 per cent of its new mortgages will be for detached houses.

He added that the political uncertainty was having an impact on the launch of new housing projects this year, which would mean lower housing transfers next year, with a consequent large reduction in new mortgages.


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