Credit outstanding of real estate increased unexpectedly while the State Bank of Vietnam (SBV) has taken control measures, leading to concerns that real estate bad debts might increase.
In a report submitted to the National Assembly by SBV at the last session, as of August, real estate credit increased by 14.58 percent (including both business and self-use purposes) compared to the end of 2018, accounting for 19.14 percent of the total outstanding loans of the economy. In particular, real estate business credit accounts for nearly 33%, and consumption is about 68.3%.
Meanwhile, consumer credit accounts for 20.68 percent of the total outstanding loans of the economy, up 13.92%, of which related to buying, renting, leasing, building and repairing houses accounting for 59.4 percent of consumer loan outstanding.
The increase in real estate credit outstanding in the last eight months is believed to come from many reasons, but the specific figures mentioned above also partly reflect: Real estate credit outstanding debt from consumption is increasing rapidly. This is actually a real estate loan hidden in consumer loans that experts have warned for a long time if they do not dissect it.
From May 2019 until now, the State management agency has continuously issued documents asking credit institutions to control consumer loans for the right purposes. Along with that is strengthening the inspection, examination and supervision of lending activities in general and consumer lending activities to ensure that lending activities are implemented transparently, publicly and in accordance with the law.
In addition to the aforementioned direct cause, the difficulties of the real estate market also lead to many debts that have to stand stillbe extended and added to the loan balance when the investor or the borrower encounters the dilemma situation.
Along with that, 2019 can be said to be the year of the most widespread and prolonged sale of virtual land projects with the typical Alibaba phenomenon. Many investors and buyers who are eager to seize the opportunity, receive high profits, are involved in these projects, the loss of money that some of the capital can come from consumer loans or even shadow banking.
Because of these problems, the real estate credit balance increased sharply compared to the end of 2018, especially compared to before the period when SBV corrected consumer loans, becoming clearer.
An expert suggested that the specific cash flow from bank capital flowing into real estate was 1.5 million dongroughly equivalent to the State capital invested in 855 State-owned enterprises.
He said that the real estate market currently has more than 10,000 businesses operating. There is no specific statistic of real estate block in the whole economy, how much total assets, the average profitability rate, and how to pay corporate income tax to the Budget, but it is clear if considering 95 real estate enterprises are listed on the stock market, the average gross profit margin is quite high (25-30%) and the industry is also creating jobs for thousands of workers.
“Real estate also links to many other industries and supporting industries such as construction materials production, design, interior and exterior, and retail. Therefore, 1.5 quadrillion dong is a large number but it is not necessary to consider blocking capital into real estate. It is critical to control this capital flow for the good quality and effectiveness, preventing from harming the banking system,” the expert said.
In another comparison, compared to previous years, from 2007 to 2008, real estate credit outstanding balance over the total outstanding loans of the whole economy accounted for over 30%, especially in the period up to above. 54%, and just dropped to 14 percent in the previous year, the current “new calculation” increase is not overly concerned. Therefore, deputy prime minister Vuong Dinh Hue in the socio-economic group discussion session at the 8th session of the XIV National Assembly analysed such statistics “to avoid to see subjective low but outstanding loans”, and pressed that “we manage, control tightly, not prevent credit from pouring into this field. Because the fact that when starting a project, real estate projects will bring services such as construction materials, furniture growth”.
But even so, another potential risk factor that may not be evident in real estate credit balances, and cannot fail to mention, is real estate bonds in total credit outstanding of banks. Currently, bonds issued by investors have a significant proportion in real estate business credit. According to the Ministry of Finance, the total offered bonds of real estate enterprises were over 47,000 billion dong, equivalent to 2 billion USD.
Worth mentioning is that bonds of real estate businesses are paying very high interest rates and there are many phenomena of investors or underwriters issuing, selling bonds to real estate businesses that are banks. There are even banks that buy corporate bonds, which are intended to restructure corporate debt…
In general, according to the orientation of SBV and the lessons of bad debt from real estate, the bank is no longer “red carpet” for real estate credit as before. However, the real estate credit outstanding figures have just been exposed because of the changing statistical method, it is still a warning to once again control the goal of diversifying quality capital into priority areas and reducing risks. risk of credit institutions across the system, cannot “open eyes and close eyes”.
