Illustrative image (Source: Maritime Bank) After a brief slowdown in the first quarter dueto Tet (Lunar New Year) in January, the market has regained momentumsince the beginning of the second quarter as the number of transactions startedto pick up.
According to the Ministry of Construction’shousing and real estate market management department, 1,050 apartments weresold in Hanoi in April, 5 percent up from the previous month.
In HCM City, 1,170 were sold, a 7 percent rise.
By late April the total value of inventoriesacross the country was down by 624 billion VND to 28.37 trillion VND (1.25billion USD).
They were down by 100 trillion VND or 77.93 percentfrom the second quarter of 2013 and by 22.5 trillion VND or 44.25 percent fromthe end of 2015.
In the first quarter of this year 924 newcompanies were established in the property sector, a 55 percent riseyear-on-year, according to a report from the Ministry of Planning andInvestment.
The sector topped in terms of increase in thenumber of newly established companies.
Developers and other investors are pouring moneyinto the sector. Banks remain the main players in the market in terms ofinvestment despite several measures by the State Bank of Vietnam to restrictloans to reduce risks.
Most notable among them is its Circular No06/2016 that took effect last July, which reduced the maximum rate ofshort-term deposits that can be used for medium- and long-term loans from 60 percentto 40 percent.
It has also reduced the risk index to 200 percentfrom the proposed 250 percent with effect from this year.
According to the Vietnam Real Estate Association(VNREA), credit institutions account for 70 percent of the total capital flowsinto the property market.
Since the property sector has recovered andinvestors favour property over gold and stocks, the banks are offering creditat lower and lower rates to lure customers.
Vietnam Public Joint Stock Commercial Bank(PVcomBank) has earmarked 10 trillion VND (440 million USD) for lending to homedevelopers and buyers.
An Binh Commercial Joint Stock Bank (ABBank)plans to lend 5 trillion VND for buying house or land and building or repairinghouses.
In January, Sai Gon Thuong Tin Commercial Bank(Sacombank) said it would earmark 3 trillion VND for mortgages at 8.5 percentinterest rate.
Asia Commercial Bank offers home loans at 7.5 percent.
Nguyen Hoang Minh, deputy director of the StateBank of Vietnam’s HCM City office, said at the end of the firstquarter outstanding loans in the property sector in the city wereworth 164.1 trillion VND (7.22 billion USD), or 10.9 percentof total loans and 19.3 percent of long- and medium-term loans.
Loans to the property sector have increased by 4percent since the beginning of this year.
But Minh said the credit is carefully monitoredand is lower than in 2007-08 when a property bubble formed and burst.
“This shows banks have been more cautious aboutgiving loans to property projects and monitor credit growth better, which helpsreduce the possibility of a real estate bubble like in the past.”
Managing property credit is crucial since thebursting of the bubble almost a decade ago has left a legacy of bad debts thatplagues the sector even now, experts have said.
Dr Nguyen Tri Hieu, an economist, said a fewyears ago banks offered preferential loans for home buyers, leading toexcessive money flows into the sector.
They should learn their lessons and be morecautious about property loans, he warned.
According to Hieu, banks are now lending moneyto both the demand and supply sides of the market.
Le Hoang Chau, chairman of the HCM City RealEstate Association, said banks should control the flow of funds especially intothe mid-priced and high-end property sectors, where most buyers are speculatorsand not people who buy houses for living.
Speculation would affect the stability of themarket and increase inventories, making the bad debts situation worse, headded.
Since the beginning of this year the centralbank has constantly urged banks to review and tighten lending to the propertysector.
It reduced the cap on the use of short-termdeposits for medium- and long-term loans to 50 percent last January and to 40 percentfrom next year to curb some of the fund flows into the property sector.
Besides, it has encouraged banks to lend tosocial housing projects to meet the demand of people who want to own a home.
Foreign Direct Investment (FDI) flowing into thereal estate market is also on the rise.
The General Statistics Office reported that inthe first quarter the sector attracted 340 million USD worth of FDI, or 4.5 percentof the total amount, to rank second only behind manufacturing-processing.
Between 2011 and the first quarter of this yearthe real estate market has attracted more than 11 billion USD worth of FDI.
M&As by foreign investors, mostly fromJapan, China, Singapore and the Republic of Korea, have continued strongly thisyear, according to Savills Vietnam.
Besides, thanks to the amendment to the housinglaw allowing foreigners and overseas Vietnamese to buy houses in Vietnam,foreigners are keen on the high-end apartment and resort segments.
In the second quarter the resort sector willcontinue to grow strongly and attract foreign and local investment, thanks tothe country’s tourism potential, according to experts.
Su Ngoc Khuong, director of Savills Vietnam,said there are two trends in the FDI: short-term investments in existingprojects that expected to make returns of 8-10 percent and long-term investmentin housing development with expected profits of 20-30 percent.
Housing developers depend less on banks whenthey tie up with foreign partners, he said.
Ben Gray, director of Capital Markets at Cushman& Wakefield Vietnam, said Vietnam would continue to attract more FDI thisyear as investors have more confidence in the market and see the country as anattractive destination.
Overseas remittances are another importantsource of investment for real estate projects.
In recent years remittances to the country haveincreased sharply, with a majority of the money going into the real estatemarket.
According to statistics from the NationalFinancial Supervision Commission, the country received over 9 billion USD worthof overseas remittances in 2011, 52 percent of which went into real estate.
Last year despite the economic difficulties,overseas remittances were still worth 9 billion USD, with 21 percent going intoproperty.
This dovetails with the central bank’s desire toreduce developers’ dependence on bank credit and for them to resort to othersources such as investment funds and foreign capital sources. –VNA
VNA
