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Buybacks could aid owners

Bangkok Post Mar 21, 2009 Homeowners struggling to keep up with their payments could benefit under a novel proposal by the second-hand property brokerage Realty World Alliance. Visit Kunatharakul, the company's president and managing director, believes investors could be encouraged to buy houses and rent them back to those who risk losing them, with a buyback option effective for around three years. Mr Visit gives the example of someone who bought property for around 1 million baht and would be paying approximately 7,000 baht in monthly mortgage installments. But if that person loses his job or his income drops, an investor could step in and buy and rent back the property at, say, 4,000 baht a month, until the original owner's circumstances improve. "If they reach a certain point, lose their jobs or are laid off and don't have enough money to pay the installments they have to resolve the problem. If not their property turns into an NPL," he said. "If at that point it is not resolved, then the property is sold in the market and they won't have a home anymore, and with their credit standing in tatters they won't be able to borrow to buy a new one. "But if they have the right means to solve the problem they would be able to buy a house if they get a new job when the economy recovers, and it could be the old one or a better one. They could ask to be allowed to buy back in three years' time at a certain price and in the meantime be allowed to rent. "As for the investor, he would have collateral ... and right now putting money in the bank only yields 1-2% interest. But if they buy a house for 1 million baht, they get 4,000 baht a month which means 5% a year, and they could sell it back to the previous owner at a premium if they get the opportunity. This is better than not resolving the problem." Mr Visit questioned why the government has not helped lowest-income earners, saying his strategy is much better than letting NPLs mount up. "The Government Pension Fund has money and can invest in property and so does the Social Security Fund. They have hundreds of billions baht, so why not set aside 10 to 20 billion to help the people and enable them to rent? The funds have members, help them first, they have been paying into the fund every month and they are facing problems so help them." While housing prices are down, Mr Visit said the fall is only about 5%, not as much as people are hoping for. And when a good property does come on the market, people are still competing to buy it, he said. "You noticed Noble's latest project in Soi Ari, they sold out in three hours, more than 100 units costing more than a billion baht. This is possible because there is still demand but the location has to be right. Noble didn't reduce the price but people were fighting to buy." Mr Visit also noticed that land sales have picked up lately, possibly because those who have savings lack good investment choices, given volatile stock markets and poor bank interest rates. They hope that land values will climb in the long term. This group of buyers is mainly focusing on the inner areas of Bangkok and if they look in the suburbs it would be in well-populated areas that show commercial potential such as a good chance to build an apartment building. Realty World itself is not opening any more offices this year but it is still hiring more staff because it obtained a non-performing asset (NPA) portfolio worth 6 billion baht from a financial institution to manage. It plans to auction some of these properties in June.

 

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