Flood-zone home prices? | Bangkok Post: learning

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Flood area property values likely to drop. Flood safe areas (Srinakarin, Bang Na, Rama IX) & condos more attractive.

Photo above of flooded housing estates outside of Bangkok (AFP photo: Pornchai Kittiwongsakul).

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Mortgage rethink, This year's flood crisis will spark a sea change in home loan criteria by Somruedi Banchongduang

The mortgage sector will likely change significantly following the flood crisis as banks readjust their debt approval criteria.

Project location, appraisal prices, home insurance and the property's business strategy will all be scrutinised more closely.

Location has normally been the main factor in a property project, corresponding positively to the cost estimate and in turn affecting banks' credit line approvals. Developers have favoured areas outside Bangkok proper but especially Pathum Thani and Nonthaburi provinces.

However, with these areas largely submerged in the recent deluge, builders may now want to invest in additional infrastructure that can guard against inundations.

Inner Bangkok's non-flood zones such as the Srinakarin, Bang Na and Rama IX areas will become more popular, leading to higher residential prices, said Chatchai Payuhanaveechai, secretary-general of the Housing Finance Association and an executive vice-president of Kasikornbank (KBank).

Conversely, appraisal values in flooded areas will decline by 10-20% next year. Credit line approval in these submerged areas will also decline from 80-90% of the home price at present.

Developers may also call for a higher down payment from the present 10-20%. 

Demand for residences in flood-free areas upcountry will spike as well. Pattaya, Hua Hin, Nakhon Ratchasima, Phuket, Chiang Mai, Hat Yai and Khon Kaen have all risen in popularity for second homes since the flooding began. Developers have also started increasing their investment in these locations.

Details of Bangkok's new city plan that will take effect next year, governing population and residence density and higher valuation of land banks, is cited as another main reason for diversifying upcountry, said Mr Chatchai.

He also listed mortgage insurance as another area to be considered. The Office of the Insurance Commission requires banks to offer two options for fire insurance with mortgages.

The first choice is fire insurance alone, while the other is fire and five other types of coverage - floods, storms, earthquakes, hailstones and rioting/terrorism - known as a "1+5 policy". Which policy is selected is up to the homebuyer.

"Homebuyers pay 279 baht a year more on average for the 1+5 policy. Fire insurance generally goes for 0.05% per million baht of the collateral price per year. For example, if a house is priced at one million baht, then the fire insurance premium will be 500 baht a year and the 1+5 policy 779 baht," said Mr Chatchai. 

He predicts this year's flooding will result in mortgage sector growth of only 6% next year, a 10-year low. 

This year's growth rate for consumer finance is now forecast at 7% to 7.5%, down from an earlier projection of 8% to 8.5% due mainly to the crisis.

However, for next year KBank is keeping its ambitious home loan growth target of 8% or 50 billion baht. 

Thakorn Piyapan, an executive vice-president of Bank of Ayudhya, said BAY will increase mortgage lending to provincial markets next year in line with market changes.

The bank has targeted 2012 home loan growth of 26 billion baht, of which 40-45% will come from the provinces, up from 33-35% now.

Pikun Srimahunt, an executive vice-president of Siam Commercial Bank (SCB), said elevation may become another main consideration for developers and lenders alike.

The new factors will influence home loan approvals as well, she said. Moreover, condominium demand is poised to spike as high-rises become more attractive.

SCB, the industry leader in mortgage lending with a portfolio of 330 billion baht, has set an ambitious target for condo loan growth next year, aiming for a 50-60% market share, up from 30% this year.

Ms Pikun said 46,000 new condo units will enter the market next year and that supply will be lower than healthy demand in the changing environment.

"With the property market poised to change significantly in the wake of the massive flooding, related businesses such as banks and valuation firms also have to adjust to keep pace," she said.

She said prices of newly built houses in flooded locations will fall by 10% next year, while those of second-hand houses will depreciate even more. 

For next year, SCB expects net mortgage loan growth of 15 billion baht to debt outstanding of 345 billion baht. 

(Source: Bangkok Post, Mortgage rethink, This year's flood crisis will spark a sea change in home loan criteria, 6/12/2011, Somruedi Banchongduang, link)
 
Real Estate Market Vocabulary

loan - an amount of money that a person, business, or country borrows, especially from a bank เงินกู้
debt - an amount of money that you owe หนี้
mortgage - a legal agreement in which you borrow money from a bank in order to buy a house, build something, develop a piece of land, etc.การจำนอง

credit - loans เครดิต เงินกู้
credit line - money that is available to be borrowed from a bank when needed (loan already approved)
banks' credit line approvals

lending - giving money to someone who agrees to pay it back in the future การให้ยืม
mortgage lending - when a bank makes a loan to buy a home

criteria - the conditions, rules, factors and standards used to make a decision or selection บรรทัดฐาน (See glossary)
loan criteria - the conditions and factors used to decide whether someone gets a loan or not

crisis - an urgent, difficult or dangerous situation วิกฤตการณ์ วิกฤต
flood crisis

spark - to cause something to happen, especially something bad ก่อให้เกิด
sea change - a very big change 
spark a sea change in ... - cause a very big change

this year's flood crisis will spark a sea change in home loan criteria

sector - a part of the economy ภาค (เศรษฐกิจ) (public sector = government, private sector = all businesses, household sector = families and consumers, banking sector,...) (See Wikipedia)
significantly - in an important way อย่างสำคัญ

the mortgage sector will likely change significantly following the flood crisis

approval - official permission การอนุมัต
debt approval - when a bank says "yes" you can get a loan
debt approval criteria - the rules that a bank uses in making a loan

banks readjust their debt approval criteria

insurance - a system of protection against loss, a person pays money every month (premiums) for a guarantee that the company will pay them money if they or their property is damaged or lost (See Wikipedia) การประกันภัย

strategy - a plan to achieve long term goals ('strategy' gives the big picture, 'tactics' the details)
scrutinised - look at and examine carefully, looking for problems or flaws ตรวจสอบอย่างละเอียด
residential - houses for families to live in (not businesses) บริเวณที่พักอาศัย

project location, appraisal prices, home insurance and the property's business strategy will all be scrutinised more closely.

factor - a fact or situation which influences the result of something ปัจจัย
location has normally been the main factor in a property project

estimate - guesses an amount (not exact)  โดยประมาณ คาดคะเน
cost estimate

submerged - under water จมน้ำ อยู่ใต้น้ำ
areas largely submerged in the recent deluge,

infrastructure - the high-cost facilities that everyone in the economy shares (water, roads, electricity, trains) สาธารณูปโภค (See Google Definitions)
inundation - flood
invest in additional infrastructure that can guard against inundations.

residence (noun) - a place that a person lives (a home or condo)
residential (adjective)  
higher residential prices

appraisal - the value of real estate (home, land, building) as estimated by an expert (real estate appraisor)
appraisal values - the estimated value of real estate

appraisal values in flooded areas will decline by 10-20% next year.

down payment - the cash payment for a house made by a home buyer (the bank loans the rest)
developers may also call for a higher down payment from the present 10-20%  

spike - a sudden increase
demand for residences in flood-free areas upcountry will spike as well.

investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)
investment in these locations.

city plan

population - all the people who live in one country, area or place กลุ่มที่อาศัยอยู่ในบริเวณหนึ่ง
residence - home, place where you live ที่อยู่อาศัย บ้านพัก ที่พำนัก ที่อาศัย

density - the number of people or things in an area
cited - mentioned as an example, explanation or proof of something else กล่าวถึง

reason - an explanation of an event, why an event happened เหตุ ; เหตุผล ; สาเหตุ

diversifying - creating a mix of many different kinds of things (assets in a portfolio), others will succeed even if some fail ความหลากหลาย
upcountry - outside of Bangkok (actually means to the north, but sometimes seems to refer to anywhere outside of Bangkok, including Pattaya and Hua Hin to the south) 

diversifying upcountry - adding some real estate outside of Bangkok to portfolio of real estate assets owned
 
land bank - land kept for future use (not used now)
higher valuations of land banks - the official value of unused land to be increased (so perhaps it can be taxed more)

Details of Bangkok's new city plan that will take effect next year, governing population and residence density and higher valuation of land banks, is cited as another main reason for diversifying upcountry,

options - choices ทางเลือก
the Office of the Insurance Commission requires banks to offer two options for fire insurance with mortgages.

terrorism - the use of violence to achieve political aims การใช้ความรุนแรงเพื่อข้อเรียกร้องทางการเมือง

collateral - property or some other valuable asset that you promise to give to a lender if you cannot pay back money that you borrowed ทรัพย์สินผูกพันตนเพื่อเอาไว้หักชำระหนี้หากไม่ชำระหนี้นั้น  (See glossary)

consumer - someone who buys and uses goods and services ผู้บริโภค
finance - to provide money for something, by lending or investing as an owner in a business, for example  จัดหาเงินทุนให้
forecast - a statement about what will happen in the future based on information available now พยากรณ์
projection - a calculation or guess about the future based on information that you have การคาดคะเน

This year's growth rate for consumer finance is now forecast at 7% to 7.5%, down from an earlier projection of 8% to 8.5% due mainly to the crisis.

ambitious - goals are very high and difficult to achieve (perhaps even too high to be achieved) ทะเยอทยาน
target - a goal; the amount you are planning to achieve เป้าหมาย
ambitious target - a very high goal (that is difficult to reach and achieve)

ambitious home loan growth target of 8%

in line with market changes - following changes in the market

targeted - chosen as a goal; aimed at ตกเป็นเป้า
the bank has targeted 2012 home loan growth of 26 billion baht

elevation - the height of a place above the level of the sea ความภูมิฐาน
considerations - details to go over and think about before deciding to do a project

for X and Y alike - for both X and Y
elevation may become another main consideration for developers and lenders alike

factors - the different things that affect the outcome of a situation, event, or decision ปัจจัย
influence - the power to have an effect on people or things อิทธิพล
new factors will influence home loan approvals

demand - the need and desire to buy goods and services by households and businesses
poised - about to happen, will happen shortly ได้มาซึ่ง

spike - increase by a big amount suddenly
poised to spike - about to increase by a big amount suddenly

high-rises - very tall buildings with many floors (tall condos and office buildings)
attractive - worth having or doing น่าสนใจ

condominium demand is poised to spike as high-rises become more attractive

portfolio - the set of investments owned by a person or company (such as securities (stocks, bonds) and derivatives) หลักทรัพย์
SCB, the industry leader in mortgage lending with a portfolio of 330 billion baht

set an ambitious target for condo loan growth next year

share - to have or use something at the same time as someone else ใช้ร่วมกัน
market share - the percentage of customers in a market that a company or a product has (See Wikipedia)
50-60% market share

the changing environment - the situation that businesses face in doing business is changing

massive - very large in size, amount or numberใหญ่โต มหาศาล

poised to change significantly
in the wake - after a big and important event
with the property market poised to change significantly in the wake of the massive flooding

adjust - to change something slightly, especially to make it more correct, effective, or suitable ปรับ
pace - the speed at which something happens ท่างทำนอง ย่างก้าว จังหวะ ที่สิ่งต่างๆ ดำเนินไป (See glossary)

keep pace - keep moving forward at the same speed (not go slow and fall behind)
adjust to keep pace - change the way a business operates so thatit doesn't fall behind (the competition, for example)

valuation firms - companies that provide the service of estimating the value of  land or a building (real estate appraisal)
banks and valuation firms also have to adjust to keep pace

outstanding - currently still exists; not finished or complete yet; a bill that is not paid yet
outstanding debt - money that a borrower still owes to a lender (hasn't paid back yet)

debt outstanding of 345 billion baht

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