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Banks’ policies to tighten purse-strings may cause shocks to property market
Commercial banks have been told to restrict lending to non-production sectors in 2011, and experts have every reason to believe that the real estate market will meet bigger difficulties in 2011 than in 2010.
The real estate market has been relying on bank loans to develop. Therefore, with a message was released about the tightening of credit to non-production sectors, both real estate developers and buyers have been warned that they will have a difficult year ahead in 2011.
Prior to that, in late 2010, when commenting about the market in 2010 management agencies and real estate developers all said that the market was gloomy with very few transactions made. They hoped that things would be different in 2011, which would help real estate developers have a prosperous year to offset a failed year.
However, they no longer cherish their high hopes. Right at the beginning of February, after witnessing the happenings in the national economy, especially the high inflation rate, real estate developers understood that the scenarios of 2010 would repeat in 2011.
A senior executive of Dat Lanh Real Estate Company said that one of the reasons that froze the property market in 2010 was a storm of overly high interest rates. Meanwhile, it is expected to be more difficult to borrow capital in 2011 because commercial banks have been told to restrict lending to non-production sectors, including real estate.
“This will be a deathblow to the real estate market,” he commented.
“I know many real estate enterprises have fallen into big difficulties. A lot of projects have been left untouched, while others have been going very slowly. Meanwhile, the competition is very stiff due to the big supply,” he said.
Tran Minh Hoang, Chair of Vinaland, agreed that the high interest rates plus the policy to tighten credit will pose more difficulties for the property market.
“I am afraid that with the policy to tighten the real estate credit, we will have to halt our projects. Meanwhile, buyers will also find it hard to access bank loans to purchase houses,” he said.
Other real estate developers have also complained that they will surely have to delay their projects, which will lead them to break the contracts signed with clients. Especially, many real estate developers will have to bargain away the projects, because they will not have enough money to continue running the projects. Real estate developers now compare them to fishermen who do not have hooks.
According to Dr. Le Xuan Nghia, Deputy Chair of the National Finance Supervision Council, the real estate market has continued falling, especially in the south. He has also warned that the market will not be prosperous in 2011. In principle, the real estate price goes up in accordance with the infrastructure upgrading process. The real estate prices go up most sharply in the areas where the infrastructure conditions are upgraded (Bridges or roads are built that facilitate traveling). However, the government has decided to tighten public investment in 2011, which means that many infrastructure projects will be delayed.
“I know that nearly all businesses, no matter how big or small, get involved in real estate projects. The enterprises, which develop real estate projects with borrowed capital, should think of transferring the projects,” Nghia said. “They should not hope to take back investment capital in one or two years,” he said.
Tuyet Ngan
vietnamnet
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