Facing concerns that credit capital is pouring into real estate, the State Bank of Vietnam (SBV) has said that the real estate loan structure has been adjusted.
The influx of credit capital into the real estate sector will create risks for the economy, which has always been raised by foreign financial institutions in recent years. For example, the World Bank’s updated report on Vietnam’s economic development has just announced in July 2019, further emphasising “limiting real estate lending through imposing a higher risk weight.”
However, there have been certain changes. Nguyen Quoc Hung, director of the Department of Economic Credit of SBV said that in the first six months of 2019, credit growth for the real estate sector was controlled by SBV in the direction of gradually reducing the proportion of credit for this sector, promoting the consumer real estate credit, and directing capital to the housing segment, to meet the real needs of the people.
More specifically, Hung informed that the credit balance for the real estate sector reached nearly 1.4 million dong, up 6.5 percent compared to the end of 2018 (the real estate debt balance accounted for 18.2 percent of outstanding loans to the economy). In particular, the real estate credit reached 473.7 trillion dong (estimated by the end of June 2019), up 2.5 percent compared to 2018. The proportion of credit in the reak estate business in the total outstanding loans of real estate sector tended to decrease (accounting for 35.48 percent in 2018 and 34 percent in June 2019), real estate consumer credit (not for real estate business purpose) reached 919.6 trillion dong, up 9.4 percent compared to 2018.
“SBV has better controlled real estate credit, diversified capital flows to the right people, especially the real needs of housing, thereby promoting the real estate market to develop more healthily and stably, contributing to ensuring banking safety and economic security, ” Hung said.
Report on the situation of real estate transactions in the second quarter and the first six months of 2019 of Vietnam Real Estate Association said, in general, the real estate market in Hanoi and HCM City declined in both supply and transaction amount. For example, in Hanoi, the supply of residential real estate in the second quarter of 2019 reached 7,772 products, an increase of 49.3 percent compared to the previous quarter. In the first six months of the year, housing supply reached 12,976 products, equivalent to 76.05 percent compared to the same period in 2018.
The amount of residential real estate transactions in the second quarter of 2019 reached 5,616 products, up 71 percent from the previous quarter. In the first six months of the year, the amount of housing real estate transactions reached 8,899 products, equivalent to 68.9 percent compared to the same period of 2018. The absorption rate of residential real estate in this period was 68.6 percent. Notably, in the second quarter of 2019, the average apartment absorption rate stayed at 84.7 percent.
“One of the main causes of the decline is because SBV’s policy of reducing real estate credit has began to affect real estate investment and trading activities,” the report said.
Le Quang Vinh, deputy general director of Vietcombank shared: “Being more cautious when opening real estate credit valve is a step in the roadmap to reduce short-term capital ratio for medium and long-term loans at banks”.
In general, some economic experts said that credit growth was under control, the credit structure of real estate changed positively, credit orientation met the demand of people on housing and SBV was subjective with high risk segment such as real estate investment. However, sharing with the Securities Investment Newspaper, Le Hoang Chau, Chair of HCM City Real Estate Association, is quite cautious when saying that there are about 14 percent of consumer real estate credit used for business.
“SBV will closely monitor the growth of real estate credit and market developments to have appropriate executive guidance. At the same time, they will strengthen the inspection and supervision of credit institutions with credit growth rates for high proportion real estate business. Besides, it is necessar to promot communication on the direction of management, as well as the adjustment of regulations on credit granting for the real estate sector, “said Nguyen Quoc Hung.
