Dec 25, 2012

Vietnam - SBV promises bailout, real estate developers bubble over with joy

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VietNamNet Bridge – Real estate developers have sighed with relief after relevant ministries agreed to pump money into the frozen real estate market to rescue it.

Instead of general promises, the government and relevant ministries have shown strong commitments on the things they would do to rescue the real estate market.

The State Bank of Vietnam has promised to slash the interest rates to make it easier for real estate developers and house buyers to access bank loans. It’s now the right time to reduce the interest rates, when the consumer price index (CPI) increase this month is less than 0.5 percent and the inflation rate of the whole year 2012 is just about seven percent.

Governor of the State Bank Nguyen Van Binh has committed that the central bank would pump 100,000-150,000 billion dong to settle bad debts. Besides, it would provide 20-40 trillion dong worth of loans at the reasonable interest rate, about eight percent, for 5-10 years, to help people buy houses.

The government has stated that it would gather strength to settle bad debts, clear inventories right from the beginning of 2013. Especially, a commercial bank has suggested a solution that banks would disburse money to the real estate developers, provided the developers commit to reduce the sale prices. The bank believes that the solution should be applied right now so as to stabilize the market and calm people down.

The information about the bailout and the solutions to rescue the real estate market has come in rapid fire. A series of meetings have been held by different ministries and organizations to discuss the solutions to rescue the real estate market.

The good news has helped warm up the stock market with the prices of real estate firms’ shares escalating slightly.

The two bourses in Hanoi and HCM City on December 19 witnessed the strong price increases of DIG, ITC, LCG, NTL, SJS, TDC, TDH, VPH, ITA, DID, DIC, DAG, PTC, PSG, PXA, S96 – all of them are the shares of real estate firms. Even the shares considered as “penny stocks” like STL or SCR, also saw the price increase to the ceiling possible level at the end of the trading session of the day.

The commitment by the State Bank about a bailout to settle bad debts and the strong determination to settle bad debts both have helped restore investors’ confidence on the stock market performance. Some investors have a high hope on an upcoming investment wave which can bring the profits of tens of percents before Tet holiday.

No further price decreases?

It’s now obvious about the things to be done to save the real estate market: money would be pumped to settle bad debts, while interest rates would be downed to help boost sales and stimulate demand.

However, there is something unclear that where the money to rescue the real estate market would come from.

The State Bank of Vietnam has not elaborated on this, but it has affirmed that it can arrange the amount of money needed.

Some experts have expressed their worry that once more money is put into circulation as planned to save the property market, the money supply increase may lead to the high inflation. If so, people would continue injecting their money in houses and land, and the so called “real estate bubble” would take shape again.

Tran Thuy


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