In the latest report on Vietnam, HSBC said real estate business accounts for about five percent of the country’s GDP and contributes positively to GDP growth since 2013.
However, with the economic model that continues to rely on credit growth to promote business and consumption, real estate credit risk is an important thing that Vietnam should keep an eye on. In 2018, the State Bank of Vietnam (SBV) targets to achieve the credit growth at 17 percent, lower than the 18.17 percent in 2017.
HSBC gives an example that the real estate market at the end of 2000s grew quickly, partly because of speculation, leading to the collapse of real estate “bubble” in 2011. The consequence is the booming of bad debts, affecting the development of banks and the overall growth of the economy. With the current growth momentum, this bank recommends that Vietnam should be cautious with real estate market.
According to HSBC, Vietnam property market is developing rather stably thanks to limited lending policies to this sector. In 2016, the State Bank released Circular No.06 which raised real estate credit risk ratio from 150 percent to 200 percent of the bank’s balance since 2017. The State Bank also lowers the maximum ratio of short-term capital for medium and long-term loan of commercial banks from 60 percent to 50 percent in 2017 and 40 percent since 2018. This helps bank credit to shift to some other sectors which are more effective, including transport and telecommunication.
At the beginning of January, the State Bank issued document No.563 requiring all credit organisations and foreign bank branches to limit lending to real estate and construction sectors; shifting lending to priority sectors such as SMEs and hi-tech industries.
HSBC assesses that recent renovations of the State Bank are positive, helping prestigious companies to develop, limiting the risk of real estate “bubble”.
