The Bank of Thailand's macroprudential policy to curb property speculation is unlikely to affect real estate companies raising funds from debenture issuance because this year's debenture rollover portion is small, says the Thai Bond Market Association (TBMA).
The TBMA said corporate bonds continue to be a popular fundraising debt instrument among private companies, including the property sector, amid low interest rates.
Tada: BoT curbs to have little impact
The value of debentures issued by real estate companies stood at 357.31 billion baht last year, seen as the second-largest debenture issuers at 12% of total outstanding long-term debentures worth 3.45 trillion baht, according to the TBMA.
The energy sector was the largest debenture issuer in Thailand's corporate bond market with 13%, while property, banking and food companies each made up 12%.
From April 1, those who seek third and subsequent mortgages will be required to pay at least 30% of the home price up front, regardless of the price bracket.
Those who purchase a home priced below 10 million baht and are seeking a second home loan will make at least a 10% down payment in the event they made payments on the first mortgage for three years or longer.
The minimum down payment requirement will be raised to 20% if borrowers have serviced the first mortgage for less than three years.
"We are not worried about the rollover risk if [the central bank's] macroprudential policy pressures the property business to decline, as the debenture rollover portion is small and the interest burden is not expected to increase substantially," said TBMA president Tada Phutthitada.
The property sector's outstanding debenture issuance has registered 11-12% of total outstanding value of corporate bonds over the past three years, Mr Tada said.
Graded long-term investment bonds issued by real estate companies rose to 76% last year, up from 74% in 2017 and 65% in 2016, while the number of non-investment grade debentures has declined after a decrease in such bond issuers, according to the TBMA.
In addition, secured non-investment-grade bonds issued over the past three years made up 56% of total non-investment-grade bonds issued in 2018, while unsecured non-investment-grade bonds fell to 44%.
"The value of long-term debentures issued by real estate companies poised to mature this year is 85.44 billion baht, making up only 15% of total corporate bonds set to mature, and 75% of them are classified as investment-grade bonds," Mr Tada said.
The property sector is not anticipated to shoulder higher interest costs, he said, and the policy interest rate is expected to be raised marginally this year.
New corporate bond issuance was valued at 879.99 billion baht last year, breaking a record for a third straight year, and rose by 6.2% year-on-year, driven by real sector issuers, which saw an 18% increase in issuance.