After witnessing high credit growth rates in the 2015-2017 period, outstanding loans are expected to increase by 14-15 percent this year. 

The State Bank of Vietnam (SBV) has controlled lending more tightly by lowering the ceiling of short-term capital that banks can use for long-term lending from 45 percent to 40 percent.

SBV has repeatedly warned of the risks against funding real estate projects, threatening to take unplanned inspection tours to banks with a high proportion of outstanding loans provided to the real estate, securities and consumer sectors.

This means that credit flow to the real estate sector will be tightened in 2019. A report shows that the current real estate market is worth $25 billion, while the outstanding loans poured into the market had reached $20 billion, or VND450 trillion, by the end of 2017. 

This figure accounts for 80 percent of total capital influx into the real estate market, much higher than the average level of 35 percent in other countries.  

As the lending capital structure remains unreasonable with latent risks, SBV has to control the capital flow into the property sector to protect the safety of the entire banking system.

However, Nguyen Ngoc Truong Chinh from Thu Duc House warned that the blocking of capital inflow into the real estate market may make it chaotic.

“Buyers won’t be able to access bank loans to buy houses, while real estate developers won’t have sufficient capital to continue implementing their projects,” Chinh said.

Real estate developers have no other choice than to see capital from non-bank sources: the stock market, corporate bond issuance and FDI.

In its report about the performance of the real estate market in the first 10 months of the year, the HCMC Real Estate Association (HOREA) showed that 58 out of 65 listed real estate firms were prospering. 

Bui Quang Tin, an economist, also commented that the stock market is a good channel that helps real estate developers seek capital, rather than rely on bank loans.

Meanwhile, some realtors have tried to call for capital via bond issuance. Thuduc House, for example, is moving ahead with the plan to mobilize VND300-500 billion worth of bonds to ease reliance on bank loans.

An analyst said that there was no need to worry, saying that FDI in the real estate sector is on the rise. In the first half of the year, FDI in the sector amounted to one-quarter of total FDI capital registered in Vietnam.

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