Bank launches mortgages for foreigners

PHUKET: Bangkok Bank has broken ranks with the Thai banking establishment to become the first Thai bank to offer mortgages targeted firmly at foreigners wanting to buy property in Thailand.

The mortgages are fairly limited in scope – they can be applied only to condos; the buyer must come up with the first 50% of the purchase price; and the mortgage term is only 10 years – but they are being hailed as a breakthrough by property developers and real estate agents.

The inability of foreigners to get mortgages to cover home purchases in Thailand has put developers and real estate agents at a disadvantage when compared with other tropical destinations where mortgages are available.

The loans, launched quietly over the past couple of months, are available through Bangkok Bank’s branches in Singapore and Hong Kong, and will normally be denominated in US, Hong Kong or Singapore dollars. Other currencies may be considered – but not baht.

In Hong Kong, where branch General Manager Phaithul Tejasakulsin said the bank has made “one or two” loans, the amount that can be borrowed ranges from HK$1 million to HK$5 million (approximately 5 million to 25 million baht). Loans are made only to Hong Kong residents.

In Singapore the range is from S$100,000 to S$1 million (about 2.5 million to 25 million baht) The loans currently carry annual interest of around 7.5%.

In addition there are fees attached. In Hong Kong, for example, a processing fee of around 125,000 baht is payable when the borrower accepts the bank’s letter of offer. About 50,000 baht of this is refunded when the loan is drawn down. In addition, at the start, 1.5% of the loan amount must be handed over to the bank as a “prepayment fee”.

The Head of the Thai Desk at Bangkok Bank in Singapore, Yaovaluk Suksathit, said that the bank there had made more than 20 loans. The Singapore branch has been pushing the service more aggressively than Hong Kong.

For example, in Hong Kong mortgages are available only for buying freehold condominiums, whereas in Singapore loans will be considered for other types of property, including homes on leased land, said K. Yaovaluk.

“It all depends on the structure,” she explained. “We have done some.” The average mortgage to foreigners granted so far by Bangkok Bank in Singapore has been about US$200,000 (8 million baht), she told the Gazette.

The mortgages may be available later through other Bangkok Bank branches, said K. Phaithul – the London office, for example. “I think [the bank] will probably look at it,” he said. Hong Kong, Singapore and Britain are regarded as the three major markets for Phuket home buyers.

K. Yaovaluk said that she and her team had visited Phuket and Koh Samui over the past couple of months to talk with property developers. This was apparently news, however, to the President of the Phuket Real Estate Club, Phummisak Hongsyok.

He welcomed the scheme, however, praising the management of Bangkok Bank for having “good vision and professionalism”, and for a move that will benefit Thailand and the Phuket property sector in particular.

“Thai banks have never loaned money to foreigners to buy property because it was difficult to secure the loans when a foreigner could not own land in Thailand,” he told the Gazette.

“There are many expatriates in Hong Kong who are interested in buying a home in Phuket because the cost of property and land here is cheaper than in Hong Kong,” K. Phummisak noted.

“Bangkok Bank has good vision and has increased the opportunities for people interested in having a house in Thailand.”