Thai Government Funds 100pc Mortgages as Market Recovers

11 October 2011

The world is still suffering from one of the worst economic and political crises it has ever suffered. With home ownership in the US and UK at record lows and still falling, it is easy to imagine that this crisis could actually have effects that forever change the way we live. Then you hear that The Government Housing Bank in Thailand is, with government funding, to offer low income earners 100% mortgages and you realise how quickly people (read governments) forget when it suits them.

 

The Thai housing market is on the turn from bust to boom fuelled by the economic recovery and tax rebates offered by the government. One wonders if additional stimulus is necessary.

 

Of course, many parts of Asia have had a cushy credit crunch. In China, Singapore and Hong Kong it has been boom city, with prices growing at incredible rates, and, while we in the west witness the consequences of greedily spurring such rapid growth, they try to make sure this doesn't happen to them by taking measures to cool it.

 

All the while you have Thailand, which is one of the few countries that did suffer quite badly during the downturn. Can we really blame them for seeing the multi-million dollar penthouse sales in Singapore and wanting a piece of the action?

 

The Thai economy is turning, and that in conjunction with the government’s ongoing programme offering tax rebates of 10 per cent for purchases of homes up to THB5mn (US$160,395) is leading to a growth spurt in the housing market, with condo sales surging. Arguably then Thailand should say right, we have turned the corner, let's think about easing up on the rebates. But instead the government is funding these new 100% mortgages with subsidies of THB800mn (US$25.6mn) per year and an agreement to allow the GHB to reduce its profit remittances to the state through 2014.

 

It reminds me of the Greek election, which had been called early by the current government because they were taking flack for reacting badly to the financial crisis. The Greek people elected the socialist Panhellenic Socialist Movement, headed up by George Papandreou who had pledged to spend 2 billion Euros if elected. After being elected he kept his pledge, and now look at Greece. Of course, I don't think that the situation in Thailand will turn as ugly, but they could come to regret applying additional stimulus to a recovering market.

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