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Vietnam Report: 60 percent of banks tighten real estate credit
The latest report by Vietnam Report shows that 60 percent of commercial banks say they will tighten procedures for lending to the real estate sector, while 20 percent of banks say they will tighten the procedures for providing long term loans.
According to the report on the real estate market in 2011 released on March 18 by Vietnam Report, the majority of banks will restrict lending to the real estate sector. As such, the capital flow to the property market will be blocked after the government announced the plan on restricting loans to non-production sectors and commercial banks committed not to pour much capital into the real estate sector.
Experts believe that with the banks’ decision, the real estate market will cool down and the real estate prices will decrease, thus making land and houses return to their actual values.
However, while the move by commercial banks and the increasing supply are believed to force the real estate prices down, people still expect to see the prices going up, and the demand for loans to develop real estate projects keeps rising.
According to CBRE Vietnam, a real estate service provider, the housing market in 2011 will witness the rising supply. The city will have 16,000 high grade apartments, which is equal to the total supply in both 2009 and 2010. Meanwhile, Vietnam Report’s survey shows that up to 67 percent of enterprises believe the supply will go up rapidly, and only 33 percent think the supply will go up step by step. Regarding the real estate price in Hanoi, 61.7 percent of consumers believe that the real estate price will keep rising.
It is understandable why the demand for real estate credit would be high. Bank loans remain the main source of capital for real estate developers to run their projects. Meanwhile, people’s expectation about the rising prices will have influences on the decisions on whether to borrow money from banks. Everyone believe that the prices would go up further. Wealthy people want to borrow money from banks to speculate in real estate, while those people who really have the demand for accommodations, cannot access bank loans because of overly high interest rates.
It seems that the real estate market is now witnessing contradictory signals which lead to different predictions about the market. On the one hand, the fact that tightening credit leads to predictions that the real estate prices would go down. On the other hand, the market’s signals show that the demand keeps increasing, thus leading to the prediction that the prices would be still high.
Meanwhile, though there is information that commercial banks will restrict lending to the real estate sector, real estate developers remain optimistic about their business.
“My understanding is that tightening real estate credit does not mean that banks absolutely will not provide loans to fund real estate project development. They will still pour capital if they find the projects feasible,” said Tran Minh Hoang, Chair of Vinaland.
“Though people predict that 2011 would be a difficult year for real estate companies, I still believe that a breakthrough will be made by our company in 2011. We plan to kick off Vinaland Tower project in HCM City later this year,” he said.
Though Le Chi Hieu, Chair of the Thu Duc Housing Corporation, admitted that the tightening of real estate credit would cause difficulties to real estate developers, he still believes that the macro economy would be better in the second half of the year, which will help the real estate and securities markets recover well.
According to the State Bank of Vietnam, by December 31, 2010, the outstanding loans to the real estate sector had reached 228 trillion dong, an increase of 23.5 percent in comparison with the same period of the last year.
Phuong Thao
vietnamnet
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