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SCB sees hotter mortgage competition in second-half

Siam Commercial Bank, the biggest mortgage lender among commercial banks, foresees competition for housing loans intensifying in the remaining months as completed condominiums are delivered to customers.

Pikun Srimahunt, SCB first executive vice president and head of mortgage business, said lenders had predicted that new housing loans this year would drop to Bt470 billion from Bt530 billion last year mainly due to political uncertainty. However, lenders have revised that forecast upward to Bt570 billion after seeing positive signs of condo transfers last month.

About 63,000 condominium units are set to be transferred to buyers in the current second half, for which loans would total Bt136 billion. That would boost total housing loans this year to Bt570 billion, she said.

In the first five months, 21,967 condos were transferred, down by 22 per cent year on year.

"We have seen more transfers of condominiums in June after the end of the political uncertainty. [Most] buyers are in Bangkok, so when the political uncertainty was unblocked, buyers accepted transfers," she said.

SCB in June alone booked new housing loans of Bt13 billion against a monthly average of Bt7 billion to Bt8 billion earlier in the year.

In the first half, mortgages lent by commercial banks totalled Bt270 billion and outstanding loans were Bt2.5 trillion. Upcountry sales helped carry the mortgage business in the first half as transfers remained stable and better than the lenders had forecast.

"Previously, transfers of residential properties upcountry were expected to slow down in line with Bangkok. But the actual volumes proved to be stable," Pikun said.

All lenders are focusing on condominiums because their volumes are greater than for other residential types, so the market share of each bank is likely to be reduced by the serious competition. SCB's margin from housing loans could drop by 10-20 basis points for this reason, she said.

However, she insisted that the bank would not offer zero-interest deals to attract clients because as the market leader, it does not want to spur speculation in the housing market. Instead there will be other incentives such as furniture or even air tickets for upper-income clients.

SCB hopes to secure 30 per cent of the Bt136-billion total, and if it can achieve that target, its total new loans this year might be Bt10 billion higher than the previous forecast of Bt100 billion, and outstanding loans will reach Bt520 billion, up from Bt480 billion at the end of last year.

In the first half, SCB approved Bt50 billion worth of new mortgages, down from Bt60 billion in the same period last year. Most of the loans in the first half were for detached houses, while those in the condominium segment were only Bt7 billion to Bt8 billion.

Supply concerns

Pikun said that since the beginning of the year, property developers had cut back launches of new condominium projects, for which construction requires at least two years. Therefore, the bank cannot predict how many condos will be delivered to buyers next year.

"Some areas of Bangkok have witnessed a shortage of condominium supply, and several clients have looked for non-performing assets among two-bedroom condominiums on Sukhumvit Road. This means there is a shortage of two-bedroom condos because developers have been building one-bedrooms instead to tap the mass market and lower their costs, especially for land," she said.

Pikun predicted a trend towards low-rise condominiums as developers need to speed up construction to accommodate demand.

Chatchai Payuhanaveechai, executive vice president of Kasikornbank, said another worry for mortgage lenders was the prospect of a low condominium supply in 2016, because developers have suspended construction in this segment since early this year, and it takes at least two years to complete a condominium project.


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