Illustrative image (Photo: vneconomy.vn) Hanoi (VNS/VNA) - If credit policiesfor luxury home purchases were tightened, it could be a shock for the propertymarket, experts have warned.
The State Bank of Vietnam plans to apply a creditrisk ratio of 150 percent for loans to purchase home worth from 3 billionVND (126,000 USD) – three times higher than the current ratio, according to adraft circular about limits and safety ratio for banks’ operation recently madepublic.
The central bank said limiting loans for luxuryhome purchases aimed to ensure the sustainable development of the real estatemarket and safety of the banking sector.
According to financial and banking expert NguyenTri Hieu, increasing the credit risk ratio would push up lending interest ratesfor luxury home purchase loans, which would harm the liquidity of thissegment.
Nguyen Van Dinh, deputy general secretary of theVietnam Real Estate Association, said tightening credit for luxury homepurchases could help direct market demand more to the medium segment.
Although the development of the medium housingsegment needed to be encouraged, it was not necessary to sacrifice the luxurysegment, Dinh said, because the market still had demand for luxury homes,especially from foreigners.
The real estate market and the high-endsegment in particular recently did not see any unusual developments, Dinh said,stressing that it was not necessary to tighten credit policy for luxury homepurchases.
If this policy for luxury home purchases mustbe applied, the central bank should consider an appropriate length of timefor the policy, he said.
Dinh added that if the policy was applied for along time, it would seriously affect the development of the high-end segmentwhile Vietnam was trying to improve infrastructure quality and living standard.
Policy making needs careful consideration toensure the balanced development of the real estate market, he said.
Nguyen Anh Tuan, deputy chairman of propertydeveloper HD Mon Holdings, said that most buyers of luxury homes used bankingcredit for the purchases, stressing the important roles of interest ratesand credit policies in boosting liquidity of housing projects.
Tightening credit policies for luxury homepurchases would create a market shock with several consequences amid aslow-down in supply and liquidity, Tuan said.
Tuan recommended that banks evaluate the financialcapacity of buyers to decide the loans, instead of applying the policy for thewhole high-end segment.
The Vietnam Real Estate Association proposed thecentral bank raise an appropriate roadmap for tightening credit for the realestate market.
The association said credit policies could betightened for land purchases which were mainly for speculation while it was notnecessary to tighten credit for housing purchase because housing purchasescould stimulate other industries such as construction, cement and steelproduction.
It was more important to consider the affordabilityof buyers, the association’s president Nguyen Tran Nam said.
Economist Vo Tri Thanh said tightening credit forluxury home purchases would cause difficulties to developers in the short term,but for the long term, it would help the market develop in a healthier way.
Thanh said that the difficulty of policy-makerswas how to promote the market development but at the same time reduce risks.
“Don’t rush to conclude that tightening creditwill negatively affect the real estate market. Monetary policy could ensure ahealthier development for the market. If there is no strict control, it mightlead to bubble burst which would affect the entire economy.”
According to Nguyen Manh Khoi, Deputy Director ofthe Housing and Real Estate Management Department under the Ministry ofConstruction, each market segment needed different policies.
The draft policy aimed to prevent overheateddevelopment of the high-end segment because this segment was the most affectedby crises, Khoi said.
As banking credit for real estate was tightened,Khoi also urged developers to seek other capital sources, such as frombuyers, foreign partners and securities and bond markets.
Tightening real estate credit was an opportunityfor developers to restructure their products and capital as well asredefining their development strategies, Khoi said.
From the beginning of this year, the ratio ofshort-term capital used for long-and- medium-term loans was reduced from 45percent to 40 percent and credit risk ratio for real estate loans raised from150 percent to 200 percent.
In the draft circular, the central bank planned toreduce the ratio of short-term capital used for long-and-medium-term loans to30 percent in 2021 or 2022. –VNS/VNA
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