Vietnam - Property market remains dull despite credit easing

The central bank’s recent move to partially loosen credit for the property sector has not worked as well as expected, sparking concern the market would worsen next year.

The central bank governor, Nguyen Van Binh, told Vietnam news agency in an interview that strict controls on lending would go into next year to help stabilize the macro economy. However, lender banks will consider borrowers in non-productive sectors such as property, securities and consumption, but with prudence.

The realty market plays an important role in driving the nation’s social and economic development, but it should be strictly supervised to prevent a bubble burst. Binh said.

Property developers have had a lukewarm response to the slightly relaxed credit policy towards the real estate sector since the overall policy for next year is still biased against easy credit.

Le Hoang Chau, chairman of the HCM City Real Estate Association (Horea), described the central bank move as a mild realty market confidence booster, saying it would not help the market turn around.

In reality, the measured credit loosening has left almost no impact on the market. Borrowers have not been able to take out loans at high interest rates while no projects could be finished by January 1 as requested by the central bank.

Businesses in the sector pointed out that if projects have just one month to go, they must be in the final stages of handing over homes to buyers at the moment, meaning that they no longer need to borrow.

Chau said the requirement that only salaried people can gain access to home loans effectively prevented owners of family-run businesses from such loans though they might have more stable incomes than the salaried.

Nguyen Van Duc, deputy director of Dat Lanh Real Estate Co., attributed the sluggish market to credit tightening and poor liquidity in the market. “Banks may give out small loans but the ailing realty market cannot resurrect overnight due to dampened buyer demand,” Duc said.

Moreover, Duc noted, companies were also to blame as they had supplied the market with homes that were more expensive than what buyers could afford.

He proposed extending the credit loosening till end-2012, helping the companies that have finished 60%-70% of their projects or lending to projects with a home selling price of below 1 billion dong per unit.

Chau of Horea proposed the central bank adopt a policy permitting the first-time buyer to access easy bank loans and work out a road map to bring lending rates down.

The tough market conditions have led realty prices to dip, offering an opportunity for more people to own a home and financially capable property developers to capitalize on this.

Saigon Times

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