Tightening credit for luxury home purchases might rock realty market: experts

If credit policies for luxury home puchases were tightened, it could be a shock for the property market, experts have warned.

Tightening credit for luxury home purchases might rock realty market: experts
Policies must promote real estate market development while limitin risks. — Photo vneconomy.vn

The State Bank of Viet Nam plans to apply a credit risk ratio of 150 per cent for loans to purchase home worth from VND3 billion (US$126,000) – three times higher than the current ratio, according to a draft circular about limits and safety ratio for banks’ operation recently made public.

The central bank said limiting loans for luxury home purchases aimed to ensure the sustainable development of the real estate market and safety of the banking sector.

According to financial and banking expert Nguyen Tri Hieu, increasing the credit risk ratio would push up lending interest rates for luxury home purchase loans, which would harm the liquidity of this segment.

Nguyen Van Dinh, deputy general secretary of the Viet Nam Real Estate Association, said tightening credit for luxury home purchases could help direct market demand more to the medium segment.

Although the development of the medium housing segment needed to be encouraged, it was not necessary to sacrifice the luxury segment, Dinh said, because the market still had demand for luxury homes, especially from foreigners.

The real estate market and the high-end segment in particular recently did not see any unusual developments, Dinh said, stressing that it was not necessary to tighten credit policy for luxury home purchases.

If this policy for luxury home purchases must be applied, the central bank should consider an appropriate length of time for the policy, he said.

Dinh added that if the policy was applied for a long time, it would seriously affect the development of the high-end segment while Viet Nam was trying to improve infrastructure quality and living standard.

Policy making needs careful consideration to ensure the balanced development of the real estate market, he said.

Nguyen Anh Tuan, deputy chairman of property developer HD Mon Holdings, said that most buyers of luxury homes used banking credit for the purchases, stressing the important roles of interest rates and credit policies in boosting liquidity of housing projects.

Tightening credit policies for luxury home purchases would create a market shock with several consequences amid a slow-down in supply and liquidity, Tuan said.

Tuan recommended that banks evaluate the financial capacity of buyers to decide the loans, instead of applying the policy for the whole high-end segment.

 

The Viet Nam Real Estate Association proposed the central bank raise an appropriate roadmap for tightening credit for the real estate market.

The association said credit policies could be tightened for land purchases which were mainly for speculation while it was not necessary to tighten credit for housing purchase because housing purchases could stimulate other industries such as construction, cement and steel production.

It was more important to consider the affordability of buyers, the association’s president Nguyen Tran Nam said.

Economist Vo Tri Thanh said tightening credit for luxury home purchases would cause difficulties to developers in the short term, but for the long term, it would help the market develop in a healthier way.

Thanh said that the difficulty of policy-makers was how to promote the market development but at the same time reduce risks.

“Don’t rush to conclude that tightening credit will negatively affect the real estate market. Monetary policy could ensure a healthier development for the market. If there is no strict control, it might lead to bubble burst which would affect the entire economy.”

According to Nguyen Manh Khoi, Deputy Director of the Housing and Real Estate Management Department under the Ministry of Construction, each market segment needed different policies.

The draft policy aimed to prevent overheated development of the high-end segment because this segment was the most affected by crises, Khoi said.

As banking credit for real estate was tightened, Khoi also urged developers to seek other capital sources, such as from buyers, foreign partners and securities and bond markets.

Tightening real estate credit was an opportunity for developers to restructure their products and capital as well as redefining their development strategies, Khoi said.

From the beginning of this year, the ratio of short-term capital used for long-and- medium-term loans was reduced from 45 per cent to 40 per cent and credit risk ratio for real estate loans raised from 150 per cent to 200 per cent.

In the draft circular, the central bank planned to reduce the ratio of short-term capital used for long-and-medium-term loans to 30 per cent in 2021 or 2022. — VNS

 
 

Other News

.
Thai billionaire, European brewer lose money in Sabeco investment deal
Thai billionaire, European brewer lose money in Sabeco investment deal
BUSINESSicon  16/10/2020 

The Sabeco price has seen a strong recovery in the last half a year, but is still at a low price. Both Thai billionaire and the big brewer Heineken have lost money because of the drop in Sabeco share price.

Salary increases in 2020 lowest in 10 years: survey
Salary increases in 2020 lowest in 10 years: survey
BUSINESSicon  16/10/2020 

Salaries increased by 6.5% this year at multinational companies (MNCs) and 5.2% at Vietnamese companies, and are forecast to increase by 7 per cent and 7.7% next year, according to the Talentnet – Mercer Total Remuneration Survey.

State firms more resilient than foreign, Vietnamese private companies: survey
State firms more resilient than foreign, Vietnamese private companies: survey
BUSINESSicon  15/10/2020 

Business resilience is highly correlated with level of digitisation, the Business Pandemic Resilience Diagnostic conducted by Grant Thornton...

Pandemic a test of fire for Vietnamese enterprises
Pandemic a test of fire for Vietnamese enterprises
BUSINESSicon  15/10/2020 

The COVID-19 pandemic has been a test for Vietnamese businesses as many have been and will be struggling to recover for the foreseeable future. 

Five expy projects unlikely to attract private investors
Five expy projects unlikely to attract private investors
BUSINESSicon  15/10/2020 

Although the National Assembly Standing Committee has given its approval to switch three of the eight subprojects of the North-South Expressway from the public-private partnership (PPP) format into wholly State-invested, 

Only 5% FDI projects in Vietnam use high technologies
Only 5% FDI projects in Vietnam use high technologies
BUSINESSicon  15/10/2020 

Vietnam is home to 32,539 valid foreign direct investment (FDI) projects with registered capital of a combined US$381 billion, of which US$233 billion has been fully disbursed.

The Vietnamese brain will decide
The Vietnamese brain will decide
FEATUREicon  16/10/2020 

"Vietnamese have nothing but brains to develop the country in the future." 

Stable outlook expected for Vietnamese dong
Stable outlook expected for Vietnamese dong
BUSINESSicon  16/10/2020 

While Vietnam is at risk of being listed as currency manipulator by the US, such a risk appears low, as the US will likely continue to reduce its dependence on Chinese exports by reorganizing its supply chain with other partners.

Vietnam banking sector to suffer in 2020 before rebounding in 2021
Vietnam banking sector to suffer in 2020 before rebounding in 2021
BUSINESSicon  15/10/2020 

Fitch Solutions expected credit growth to weaken to 7% in 2020 from 13.7% in 2019, but the growth is predicted to pick up to 12% one year later.

Realising revised growth ambitions
Realising revised growth ambitions
BUSINESSicon  15/10/2020 

Vietnam’s fourthquarter economic outlook is brighter on the back of a rise in domestic consumption and public investment.

Businesses line up for further support
Businesses line up for further support
BUSINESSicon  15/10/2020 

Continued facing with massive woes, the business community in Vietnam is in dire need of the government’s assistance for investors and enterprises to struggle through the global health crisis and grabbing new business

Infrastructure development at the centre of PPP decree direction
Infrastructure development at the centre of PPP decree direction
BUSINESSicon  16/10/2020 

Further clarifying the legal framework for infrastructure development via wider participation of private investors is expected to help the country attract more funding into the industry.

Gov’t support aids automobile industry
Gov’t support aids automobile industry
BUSINESSicon  14/10/2020 

The domestic automobile industry was forecast to thrive, given the Government’s supports in tax policies for imported automobile components coupled with the increasing income of citizens.

Digital economy and fintech see growth amid COVID-19
Digital economy and fintech see growth amid COVID-19
BUSINESSicon  15/10/2020 

The Prime Minister’s Economic Advisory Group met with the local fintech firm MoMo in HCM City on Monday.

Vietnam Airlines reports huge losses
Vietnam Airlines reports huge losses
BUSINESSicon  14/10/2020 

Vietnam Airlines Group, listed as HVN on the HCM Stock Exchange, earned nearly VND24 trillion (US$1.04 billion) in total consolidated revenue in the first nine months of this year, marking an estimated loss of VND10.75 trillion, 

Vietnam to increase imports of coal and gas
Vietnam to increase imports of coal and gas
BUSINESSicon  14/10/2020 

The latest data from the ministry sent to the National Assembly shows that Viet Nam is transitioning from an energy exporter to a net importer.

Coastal developers prepare for good upcoming times
Coastal developers prepare for good upcoming times
BUSINESSicon  14/10/2020 

In anticipation for the world eventually opening back up for travellers, developers are exploring the high potential of Vietnam’s world-renowned coastal urban areas.

Tax relief should not be “One size fits all”
Tax relief should not be “One size fits all”
BUSINESSicon  14/10/2020 

The Private Economic Development Research Board, under the Advisory Council for Administrative Procedure Reform, has proposed a 30% reduction in corporate income tax for all businesses this year.

Big investors pour money into IZ projects as land fund declines
Big investors pour money into IZ projects as land fund declines
BUSINESSicon  15/10/2020 

The land rent in some industrial zones in Hai Phong, Bac Ninh and Hai Duong has increased by 20-30 percent.

Vietnam urged to develop night-time economy
Vietnam urged to develop night-time economy
BUSINESSicon  14/10/2020 

Vietnam has missed some economic development opportunities and should not ignore the chance to grow the night-time economy, according to economist Tran Dinh Thien.

 
 
 
Leave your comment on an article

OR QUICK LOGIN