Despite repeated warnings, the State Bank of Vietnam (SBV) has not had any concrete move showing that the agency is tightening real estate credit.
According to the National Financial Supervisory Commission (NFSC), the property market is warming, strongly attracting capital flows, from domestic investment, foreign direct investment, remittances, etc. to credit capital of banks.
“Currently, banks are not just capital suppliers to real estate businesses but also target at investors, consumers having demand for real estate purchase”, said Truong Van Phuoc, Acting Chair of NFSC.
Real estate credit now accounts for only eight percent of total outstanding loans, but hides quite a lot in consumer credit. In recent years, consumer credit has increased 50-60 percent, reckoning for about 17 percent of the total outstanding loans. More than 50 percent of consumer credit is used to serve the demand for purchasing and repairing houses.
According to economists, the full calculation, both directly and indirectly, (via consumer loans, construction loans), shows that the total oustanding real estate loans may amount to 20 percent of the total outstanding loans.
“It can be seen that, despite policies on restriction of credit to real estate market, in many ways, both directly and indirectly, the capital source, mainly bank capital, still continues rising and helping to recover this market”, said Truong Van Phuoc.
In fact, commercial banks are very interested in real estate loans due to large profits, less devaluing collaterals, high liquidity, etc.
Nguyen Tu Anh, deputy director of the Monetary Policy Department (under the State Bank) said that real estate is an essential part of the economy. The stable development of this sector is an important driving force for the sustainable development of the economy in general, so the State Bank has no plan to tighten real estate credit.
“Monetary policy for real estate sector does not mean to limit credit to this sector, but to support the market’s healthy development”, said Tu Anh.
The massive flow of credit into real estate caused some experts to concern. Dr Nguyen Tri Hieu, an economist said the risks in the real estate market are on the rise, causing the State Bank to warn about real estate credit.
Specifically, at the beginning of this year, the State Bank issued Document No.563/NHNN-TTGSNH requiring credit organisations to focus capital on manufacturing and business, limiting the credit concentration on real estate, construction sectors. Also from January 1, 2018, under Circular No.19/2017/TT-NHNN, the ratio of using short-term capital for medium and long-term loans is only 45 percent.
However, new signals of real estate credit tightening are also worrying businesses. Nguyen Chi Tanh, director of Thanh Binh Hanoi JSC said if credit into real estate is limited, a series of businesses and labourers will be affected, and the people are also difficult to access affordable houses.
Dr Nguyen Tu Anh said the State Bank’s issued warnings about real estate credit are normal and this does not imply that the Agency has started to tighten the lending.
“If the State Bank limits the growth rate of real estate credit, then it means tightening. If it just issues warnings, then it does not mean tightening”, said Tu Anh.
However, the State Bank’s representative also supposes that real estate is the sector that has much potential risks, and is very easy to create speculation bubbles and may risk causing the whole economy to collapse as real estate bubbles steam. Therefore, the State Bank will always monitor, issue warnings about real estate risks to minimise bubble risks.
In 2017, the State Bank also continuously issued warnings about real estate credit, but still maintained reasonable capital source for the stable development of this market. The regular warning helps real estate businesses not to grow too hot, leading to failure as in the previous period.
Though credit into real estate market will continue flowing normally in 2018, experts also warn that real estate businesses need to diversify capital attraction channels, reducing the reliance on banks. In order to do so, businesses must create trust for customers and investors that operate transparently and prestigiously.
