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Government Housing Bank - Thailand

Global Housing Finance After the Crisis:

An Example of a Real Estate Market Observatory :

Thailand

Ballobh KritayanavajG H Bank - Thailand

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An Example of a Real Estate Market Observatory :

Thailand

Three Parts of the Presentation

1. Impact of the crises on the Thai economy

and banking sector.

2. Impact and responses to the crises

on housing and housing finance market risks .

3. G H Bank’s special role as a real estate observatory

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Thailand GDP Growth Rates

Thai economic growth declined to 2.6% in 2008 compared to 4.9% a year earlier, and contracted -2.3% in 2009. BOT estimated GDP to grow by 5.1% in 2010 and 4.0% in 2011.

1. Impact of the Crises on Thailand’s Economy and Banking Sector

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Performance of Thailand’s Banking Sector

2005 2006 2007 2008 2009• Asset Growth % 9.8 8.3 4.1 11.6 3.0• Loan Growth % 8.5 3.7 2.5 11.4 -1.7• Deposit Growth % 8.5 6.0 5.4 9.2 1.1• Net Profit (Millions of Baht) 107,000 65,000 24,000 99,000 92,000 • %NPL 8.29 7.46 7.28 5.26 4.82• BIS CAR % 13.8 14.1 14.9 14.2 16.1• NIM % 2.85 3.16 3.29 3.36 3.05

• MLR % 6.50 7.50 6.85 6.75 5.85

1. Impact of the Crises on Thailand’s Economy and Banking Sector

The Thai banking sector was strong enough to weather the current global crisis. It was quite resilient and robust, even though it faced with the economic slowdown in 2009 .

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2. Impact and Response to the Crises on

Housing and Housing Finance Market Risks.

The housing finance sector : Better risk management

• much more cautious after the 1997 crisis,

• began closely monitoring housing markets and trends

• implemented prudent mortgage underwriting practices

• No banks provide high value mortgage loan of more than 10 million baht

with LTV higher than 70%

• charge prepayment penalties if borrowers refinance with other banks

during initial 3-5 years.

• “cushioned- installment calculations” and “adjustable loan terms”

practices

• Low NPL ratio averagely only about 3.5%

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2. Impact and Response to the Crises on

Housing and Housing Finance Market Risks.

The NPL ratios of commercial banks in Thailand during the global crisis years were still in downward trend, stood at 3.6% in 2008 and 3.5% in 2009.

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New Home Loan Origination in Thailand

2. Impact and Response to the Crises on

Housing and Housing Finance Market Risks.

Thai banks were able to provide new home loans of 318,866 million baht in 2009, the highest ever recorded, an increase of 11 % from 2008.

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Housing Sector : Resilient and well adjusted during the economic downturn

• housing developers became much more cautious after the 1997 financial crisis.

• Many developers have professionalized their operations

• became active participants in professional housing developers’ associations :

• could better adjust to the economic and market downturn.

• closely monitored the housing market and conducted extensive market research before

developing projects

• GH Bank has provided developers with useful statistics, information and other

relevant knowledge.

• no housing oversupply in the market

• most housing developers are stronger financially.

2. Impact and Response to the Crises on

Housing and Housing Finance Market Risks.

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Newly Launched Housing Units by Developers in Bangkok Metropolitan Region

2. Impact and Response to the Crises on

Housing and Housing Finance Market Risks.

New housing units offered for sale in Bangkok Metropolitan Region shrunk by 16% in 2008 and 25% in 2009 in response to the economic slowdown .

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Housing Completions in Bangkok Metropolitan Region

2. Impact and Response to the Crises on

Housing and Housing Finance Market Risks.

Housing completions expanded to 90,971 units in 2009, an increase of 9.5% due to the earlier year investments.

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1995 : Year 1 No. 2 1996 : Year 2 No. 6 1997 : Year 3 No. 8 1997 : Year 3 No. 9

Huge H. Oversupply Housing Crisis Real Estate Cycles Financial Crisis - RE Crisis

GH Bank Housing Journal as a real estate observatory and an early signal warning sender.

3. GH Bank’s special role as a real estate

observatory

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2008 : Year 14 No. 55 2009 : Year 15 No. 56Global Financial Crisis Global Economic Crisis

3. G H Bank’s special role as a real estate

observatory

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2000 : Year 6 No. 21National Housing Information Center

2003 : Year 9 No. 35National Real Estate Information Center

GH Bank (MOF) established National Real Estate Information Center in 2004

3. G H Bank’s special role as a real estate

observatory

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Real Estate Information Center (REIC)

Established : 2004Structure : Separate organization, attached to GH Bank

with its own Board of DirectorsFunding : GH Bank

Data Sources: Various organizations eg. BOT, DOL, BOI, BMA

Publication : Quarterly Journal + Annual Reportfree and subcription

Website : Monthly update in www.reic.or.thThai & English

Statistical Series : 5 Series (next slide)

Users : Government agencies, BOT, financial institutions,real estate developers etc.

3. G H Bank’s special role as a real estate

observatory

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Five categories of REIC real estate indicators

1. Supply Indicators: land subdivision permits, building permits, housing starts and housing completions, etc.

2. Demand Indicators: sales, property ownership transfer, etc.

3. Price Indicators: House Price Index, housing rental rate, etc.

4. Financial Indicators: housing finance, NPLs in real estate sector, etc

5. Other Indicators interest rate, population, birth rate and death rate, etc.

3. G H Bank’s special role as a real estate

observatory

http://www.reic.or.th

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Example of REIC’s House prices index in Bangkok, 2008-2010.

3. G H Bank’s special role as a real estate

observatory

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Thank You2010 (Q2) : Year 16 No. 61

Thailand Housing Direction

2006 : Year 12 No. 47

Real Estate Cycles

3. G H Bank’s special role as a real estate

observatory