Experts urge bank lending to productive property projects
20-NOV-2008 Intellasia | Saigon Times Daily page 2
Nov 20, 2008 - 7:00:00 AM
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Foreign experts have underlined the need to make bank loans more accessible for property projects with potentials of meeting domestic demand and helping to pull the market out of current hibernation.
Many developers need bank loans to finance their projects, Alain Cany of Jardine Matheson Vietnam said, adding lending should go to the developers that provide the right products for the market.
There are concerns that it is still too early to ease credit tightness for the market as the central bank has adopted a string of monetary policy changes to cope with the credit crunch which is feared to thwart the country's economic growth plans.
"There's much need in Vietnam for additional apartments and offices," said Cany, who is country chair of the company which operates in a diverse scope of business and financial services and property, among others.
He, however, said lending should be made gradually.
Brett Ashton, managing director of Savills Vietnam Ltd, is on the same side of Cany. Ashton said that once banks started lending again, the market would react "as the lack of finance is certainly one cause of the slowdown."
Cany, who is also chair of the European Chamber of Commerce in Vietnam (EuroCham), believed the market would recover when loans were provided for the productive projects and given that lending interest rates would continue to be lower.
But, Ashton warned banks should not be forced to lend to designated projects. "Bankers are also running a business and they must make prudent decisions on who they loan to and how much they lend.
"Otherwise, we will be reading about banks who make bad loans suffering, which would be a far more worrying problem than real estate developers with no money:'
Ashton explained if banks were forced to lend, then the allocation of money would not go to the most productive projects. "Markets in general are very good at allocating money to the most efficient use and at the moment, real estate is not the most efficient use:'
Ashton said the property market would sort itself out over time and that the strong would survive and make the market as a whole stronger.
Cany expected many Vietnamese people would be able to buy apartments again at more reasonable prices than months ago when housing prices in HCM City and Hanoi were too high and two to three times higher than in Bangkok, Thailand.
Cany said housing prices in Vietnam were being corrected and would go down to reasonable levels in a few months when investors and developers came back to the market.
Ashton said the real estate market was going through a natural readjustment after a sharp boom. He stressed land prices needed to come down more as the main culprit of the slowdown was the high cost of cleared land.
Ashton said there was still demand for the right product but developers should find out what their customers needed if they wanted their projects to be successful. "The days of simply producing a nice concept drawing of a building and then selling are over. Developers need to understand who their customers are going to be before they buy land," he said.
"The problem has been that so many people paid too much for their land that they are forced to design and sell luxury property even though the market is clearly looking for more affordable housing,' Ashton told the Daily after Savills Vietnam released a report on the property market.
The report says some projects targeting low-end products in HCM City have been launched successfully this year while the high -end of the market has been a poor performer. The average secondary price of apartments dropped 5-25% in the third quarter of this year compared to the second quarter.
"There are a number of high -end apartment projects that have been put on hold waiting for the market to improve," the report says. The report indicates developers for mid-range products are adjusting their launch price and size units.
Cany told the Daily that property developers should supply apartments not only to the rich but also to the middle-class buyers. "There are a large emerging number of middle-class people in Vietnam and they should have the products at the price they can afford."
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