Home loans dominate Vietnamese real estate loans
Hoang Nam recently bought a VND 2.4 billion (US $ 103,814) apartment in District 9 of HCMC and borrowed 60 percent of the amount from a bank. He said he was motivated to buy by lower lending rates.
Most commercial banks have slashed their home loan interest rates by 1-2 percentage points since the start of the year to 7-11.5 percent per year in an effort to boost credit growth amid the Covid-19 pandemic.
According to a recent report by the State Bank of Vietnam (SBV) presented to parliament, real estate loans of VND 1,600 trillion account for over 19 percent of the total. More than 62 percent of this was drawn on through home loans.
In HCMC, real estate lending grew 7.2 percent to over VND 300 trillion in the first ten months, compared with total lending growth of 5.5 percent over the same period.
Nguyen Khac Quoc Bao, director of the fintech institute at Ho Chi Minh City University of Economics, said the flow of credit is in real estate as investments in manufacturing and services decline amid the Covid-19 troubles.
Soaring property prices over the past few decades, coupled with the Vietnamese’s high appreciation for property investments, also explains why residential property makes up a large portion of loans, he added.
However, according to some experts, this also increases the risk of increasing bad debts, as happened in the course of the economic crisis in 2008/2009.
Economist Nguyen Tri Hieu said although Vietnam managed to contain the Covid-19 outbreaks, commercial banks still need to be cautious about lending to prevent bad debt spikes.
The central bank has taken some steps to reduce the risks associated with real estate lending. A circular that came into force at the beginning of the year increases the risk factor for real estate loans and forces banks to be more selective in granting them.
However, several industry insiders have said that real estate company bonds could also see an increase in bad debts.
Lender’s assistant director Sacombank Phan Dinh Tue said that although bonds are a form of credit, some banks cannot include them on their home loan reports, making it difficult for officials to keep track of the correct number of home loans.