Monday, August 6, 2007

Foreigners financing Thai condos through Singapore banks

Singapore _ Foreigners keen on buying freehold condominiums in Thailand have always had great difficulty obtaining financing from Thai banks, until Bangkok Bank's Singapore branch pioneered the service two years ago.

Now the bank is extending its loan terms from 10 years to 20 and has also increased the amount available to 70% of the purchase price from 60% earlier.

"So now borrowers can get more benefits from the programme," said Torphong Charungchareonvejj, general manager of the BBL branch in Singapore.

He said the number of inquiries about the service had also prompted the country's largest bank to make information about financing for foreigners available from selected branches in Thailand as well.

The success of the BBL programme has prompted Singapore's United Overseas Bank, which also has a presence in Thailand, to make similar offers to non-Thai borrowers.

Bangkok Bank customers who borrow Singapore dollars to buy condominiums are charged the prime rate, currently 6% per year. Loans in US dollars are charged the USD prime rate, currently 8.25%, plus 0.5%, or 8.75%. Loans in euros are charged the euro prime rate, currently 7.25%, plus 1%, while loans in yen carry the yen prime rate of 2.85% plus 1.25%, for a total of 4.10%.

The maximum loan amount is US$800,000 or equivalent and the minimum is US$100,000.

Mr Torphong said the majority of the borrowers were Britons, French and Singaporeans with a lot of other Europeans showing interest. The average loan amount is S$250,000, or 4.95 million baht.

Based on the applications BBL's Singapore branch has handled, demand among foreigners is greater for condominiums in Bangkok rather than resort properties in Phuket. However, Mr Torphong notes that the bank does get applications to finance property in the resort island and in Hua Hun.

While many clients are buying property to live in, others are investors who are seeking returns of 5-7% a year plus capital appreciation, he added.

Bangkok is attractive to them because prices are relatively low compared with Malaysia and Singapore itself, where values have been surging in part due to large inflows of foreign investment.

Mr Torphong acknowledged that there had been a slowdown in condominium loan applications, reflecting political and economic uncertainties. However, property prices have not dropped, so some buyers believe they should conclude deals before prices start rising again.

"If we look long term, we are quite bullish about 2008. Hopefully the [new] government will provide confidence ... and by then the Thai economy should come up again, catching up with our Asian neighbours," he said.

"In 2007 we expect GDP growth of around 2.8% to 3.8% so 2008 should be much better because we will be coming up from a low base."

Mr Torphong said he fully supported recent moves to stem the baht's rise against the US dollar, noting that relaxing foreign direct investment and foreign portfolio investment overseas is the right strategy. "Since Thailand has an export economy, we have to export, but if the baht-dollar rate is too strong then we will have difficulty."

The sharp upturn in foreign fund inflows has hardly been unique to Thailand, he noted. "The whole world is now flooded with oil funds, given that the oil price is now $70-plus per barrel, so a lot of oil money does create a lot of supply. Of course, the other part is some funds are moving to this part of the world from the US and Europe."

While Thai-Singaporean political relations have been strained over the past year, Mr Torphong said average Singaporeans still liked visiting Thailand and the bank continued to receive its share of loan applications from them as well.

Singaporeans enjoy the benefit of a liberal financial market and numerous products for personal investment compared with their Thai counterparts. Mr Torphong believes it will take time for Thailand to change its legal and tax frameworks to accommodate more financial products.

Among the financial instruments popular in Singapore are real estate investment trusts (REITs) which are commonly referred to as property funds in Thailand. Mr Torphong noted that Thailand's property-fund market was still quite small and illiquid but was likely to expand over time.

"[In Singapore] we have REITs for the hotel business, serviced apartments, shopping malls, industrial parks, even vessels. Almost everything can now be put into a REIT for fund-raising and this is how fast the market has developed."

The Monetary Authority of Singapore (MAS), the central bank, has laid a broad foundation for the investments, which allow developers and asset owners to benefit by converting long-term fixed assets into cash for immediate use.

Mr Torphong also observed that Singaporean property developers are more willing than their Thai peers to sell fixed assets and reinvest the proceeds. "That's how they look at their financial planning."

Even big Singaporean companies see the benefits of turning assets into cash _ both DBS and Singapore Airlines have sold their headquarters buildings. "So that is their mindset. Such large corporations securitise their fixed assets and make use of their additional resources.

1 comment:

Uncle David said...

BS, went to ask from Bangkok Bank of Singapore and they told me they don't do loans for singaporeans in bangkok anymore.
any other suggestions?