Vietnam’s Real Estate Market to Be Rescued?

Under the growing pressure of changing standpoints and monetary policy application methods about the Vietnamese real estate market from the Ministry of Construction, the State Bank of Vietnam (SBV) will carry out a review on this market and base on new developments to provide credits to some market segments.
After the reassessment is completed, the SBV will propose the Vietnamese Government to amend policies to match new situations. According to experts, lending for speculative land investment will continue to be tightened but banks will consider a certain degree of lending to some other segments of real estate market.

This is considered a success of the Ministry of Construction when it points out that it is illogical to equate all activities relating to housing, land and infrastructure construction to non-manufacturing activities. A banking official explained that in a diverse economic environment, the interdependence of different sectors is very crucial. If activities related to housing and infrastructure construction are viewed as non-manufacturing, the construction of industrial parks and export processing zones will also be subjected to this classification while they lease facilities to manufacturing enterprises. This is totally different from the construction of resorts or consumer lending.

Banks also want a flexible approach to property lending. A banker said it is necessary to maintain the credit limit for non-productive fields but the limit needs reviewing for better effect. Affordable housing and resettlement housing segments should be considered as productive field as it promotes the objective of social security. If this context is not changed, the collapse of the property market is not a distance future.

As Vietnam does not have many different forms of fundraising, therefore capital-intensive property market largely relies on bank loans. Any development on the real estate market has direct impacts on operations of banks. For that reason, many lenders fail to restructure their credits because they cannot handle real estate loans when the market liquidity turns sour. A series of solutions to unfreeze capital sources, lower interest rates, strengthen liquidity, reduce bad debts and others synchronously adopted by banks will largely depend on the development of real estate market.

However, according to experts, with a credit growth limit of 20 percent, or even lower (around 18 percent), loans for real estate projects will not be abundant although the State Bank of Vietnam widen the scope of borrowers.

Another reason to disbelieve in the recovery of the property market this year is the shrinking demand of real estate. A loosened monetary policy will widen the access to credit sources for property developers, thus helping increase the supply to the market, but the demand is unlikely to rise because banks still hold back consumer lending.

According to statistics, outstanding consumer loans slid 23.1 percent in the first eight months of this year, and are unlikely to increase in the coming time because of full limit at many banks. The adjustment to the scope of real estate borrowers can only hold up the slide this year. But, this is also a foundation for many to believe in a brighter prospect of the real estate market in 2012.

Tags: Vietnam Property market, Vietnam property sector, vietnam real estate market

Posted by VBN on Sep 17 2011. Filed under Real Estate. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry