Controlling credit flows into the real estate sector should not be viewed as an attempt to tighten the market or block capital, but rather as a way to guide investment toward appropriate projects, limit speculation and safeguard financial stability.

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Economist Le Ba Chi Nhan.

According to economist Le Ba Chi Nhan, this policy should be understood as a necessary adjustment to ensure the long-term health of both the financial system and the broader economy.

Speaking to VietNamNet, Nhan explained that the real estate sector in Vietnam has strong connections with the banking system, corporate bond markets, public investment and household consumption.

When credit flows too quickly into property within a short period, risks extend beyond the real estate sector itself. These risks can affect macroeconomic stability, particularly through rising bad debts and imbalances in medium and long-term capital within the banking system.

Therefore, current credit control measures should be seen primarily as a preventive step in managing economic cycles rather than a response to an existing crisis.

Rising home loan interest rates are already influencing market behaviour. Highly leveraged speculative investment is likely to decline significantly, which could slow the rapid increase in asset prices.

According to Nhan, this shift is necessary to return real estate to its original purpose as a sector serving housing needs and urban development, rather than functioning primarily as a speculative financial asset.

At the macroeconomic level, the policy may also encourage a reallocation of resources within the economy.

As credit becomes less readily available for high-risk property projects promising quick returns, capital may gradually shift toward sectors such as manufacturing, exports, industrial processing, infrastructure development and technological innovation - areas that generate real economic value and long-term productivity.

Vietnam’s real estate market is also entering a period of structural transformation.

In previous years, growth relied heavily on rising land prices and extensive financial leverage. In the coming period, however, success will increasingly depend on genuine project development capacity, the purchasing power of households and the efficient use of real estate assets.

In the short term, this shift may slow overall market growth. However, the market is expected to become more stable and sustainable over time.

From a policy perspective, Nhan believes the main challenge is not deciding whether to tighten or loosen credit, but rather implementing selective control.

Credit should continue to prioritise social housing projects, reasonably priced commercial housing and projects that have completed legal procedures and can bring products to market in the near term.

“If this principle is applied effectively, the real estate market can maintain growth momentum without creating pressure on the national financial system,” he said.

Designing mechanisms to guide capital flows

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Controlling real estate credit is intended to guide capital toward the right projects and reduce speculation. Photo: Hoang Ha
 
 
 

According to Nhan, the key issue today is not whether to tighten or loosen real estate credit, but how to design mechanisms that channel capital toward the right purposes.

The objective is to limit speculation while still ensuring that genuine developers have access to financial resources.

One important step is shifting from sector-based credit control to risk-based assessment of individual projects and capital use.

Not all real estate projects should be treated as high-risk investments. There are major differences between projects serving genuine housing demand, industrial parks or well-planned urban developments and those focused primarily on speculative land trading.

Credit policies should therefore prioritise projects that have completed legal procedures, have clear development schedules and are capable of generating real cash flow.

Another measure involves controlling speculative investment through financial tools rather than purely administrative restrictions.

For example, higher credit risk coefficients could be applied to loans used to purchase second or additional properties, or to short-term borrowing aimed at speculative “flipping”.

This approach can reduce speculation while still ensuring that homebuyers with genuine housing needs and developers working on legitimate projects can access funding.

A more fundamental solution is the development of long-term capital channels outside the banking system.

Currently, many real estate developers depend heavily on bank loans, even though the nature of the sector requires long-term financing.

Restructuring the corporate bond market by improving transparency, standardising information disclosure and strengthening credit rating systems could help capable companies mobilise capital more sustainably without placing excessive pressure on the banking system.

Another key factor is aligning credit policy with legal reforms related to project approvals.

In reality, one of the biggest challenges facing real estate developers is not only access to capital but also legal delays that significantly increase financial costs.

When projects receive approvals more quickly, capital circulation improves, the need for borrowing naturally decreases and credit risks for banks can be better managed.

In the long run, Nhan believes the property market should be guided toward a development model based on genuine housing demand and efficient asset management rather than land price speculation.

When developers create products that match the purchasing power of residents, capital will naturally flow toward effective projects without requiring strong cyclical tightening measures.

“The optimal solution is not to block capital from entering real estate, but to ensure that capital flows only to projects that create real economic and social value,” Nhan said.

“This is essential for both controlling financial risks and maintaining the role of real estate as a driver of economic growth.”

Nguyen Le