Bank of Thailand to Relax Loan-to-Value Limits to Stimulate Struggling Property Market
The Bank of Thailand has announced a relaxation of loan-to-value (LTV) regulations aimed at revitalizing the weakening property market. The central bank stated that these adjustments are not expected to pose significant risks to financial stability.
Effective from May 1, 2025, until June 30, 2026, the new guidelines will allow loans covering up to 100% of the collateral value for first homes valued over 10 million baht and for second homes priced below 10 million baht.
The bank acknowledged that the real estate sector continues to exhibit signs of a prolonged downturn, lacking clear indicators of recovery.
This announcement comes amid rising household debt levels and cautious lending practices by financial institutions, which have collectively dampened local demand for new residential properties. Additionally, international buyers are yet to return robustly to the Thai market.
Real estate developers have argued that adjustments to the current LTV regulations, initially implemented to mitigate speculative investments and prevent excessive household debt, could be made without jeopardizing financial stability.
Currently, first-time homebuyers can secure loans of up to 100% for properties valued under 10 million baht, while those seeking properties over that threshold can borrow up to 90%. For second-home buyers, loan limits reach 90% for properties under 10 million baht, contingent upon maintaining mortgage payments on their primary residence for at least two years; otherwise, the rate falls to 80%. Buyers pursuing third properties are limited to a 70% LTV ratio regardless of the value.
The existing regulations were first introduced in April 2019 but saw temporary relaxations between October 2021 and December 2022 during the economic recovery post-pandemic. However, the central bank restored the original limits at the start of 2023 due to emerging risks associated with property speculation.
Somchai Lertlarpwasin, a central bank official, indicated that loosening LTV criteria during this period would not significantly increase financial risk due to the prevailing tight financial conditions and lenders’ cautious credit practices.
In 2024, home loan issuance dropped by 13.4% year-on-year, totaling 587 billion baht, while national residential property transfers decreased by 6.3%, according to statistics from the Government Housing Bank.
Thailand’s household debt has reached 16.34 trillion baht, approximately 89% of GDP, ranking among the highest in Asia and acting as a drag on economic consumption and growth. The central bank emphasized the need for sustainable solutions to address household debt while maintaining financial discipline.
Additionally, the Finance Minister announced plans to reduce transfer and mortgage registration fees within a month to further support the property sector, stating, “This engine has not been fully operational for over a decade.”
The previous cut on ownership transfer fees and mortgage registration fees to 0.01% for houses valued up to 7 million baht ended last year.
The Finance Minister is also exploring options to manage small-scale bad debt, particularly concerning consumer loans under 100,000 baht, which he claims would involve minimal budgetary impact, primarily for management costs.
Industry Insights on the Impact of Eased Lending Curbs
Prasert Taedullayasatit, president of the Thai Condominium Association, noted that the relaxed lending regulations could stimulate demand in the mid and upper-end segments of the market, especially among buyers seeking second or third homes. He suggested that these easing measures should remain in place for at least two years or until economic conditions improve.
However, some developers and property analysts believe that the impact of these eased lending restrictions may be limited. They argue that additional measures, such as further reductions in transfer and mortgage fees and lowered interest rates, would be more effective in enhancing borrowing capacity.
