Real estate credit up strongly

22-Dec-2016 Intellasia | SGT | 6:00 AM Print This Post

Bank loans for the property sector are estimated at some VND150 trillion (US$6.7 billion) this year, a 14.2 percent pickup from a year earlier, according the HCM City Real Estate Association (HoREA).

The 14.2 percent spike is the highest in recent years, HoREA said in a report. Meanwhile, the bad debt ratio stays at some 2.6 percent.

The association noted that HCM City-based realty developers also invest in other central and southern localities.

Notably, outstanding consumer loans in HCM City are expected to reach VND202 trillion at the end of this month, making up 14.7 percent of total outstanding loans. Of the sum, over VND70 trillion are taken out by customers to build and repair houses, meaning the amount of credit for real estate is higher than reported. These bank loans should be monitored as borrowers may use them to invest in the property sector.

According to the State Bank of Vietnam (SBV), credit had grown 14.57 percent by end-November with dong credit growth staying at 15.81 percent.

In HCM City alone, outstanding loans had amounted to VND1,374 trillion, or roughly $60 billion, up 16.4 percent and accounting for the biggest proportion of the country’s total. The bad debt ratio had stood at 3.79 percent and may fall to 2.03 percent if bad debts of Ocean Bank, Vietnam Construction Bank and Global Petroleum Bank, the three ailing banks acquired by the SBV at zero dong, are excluded.

HoREA said capital inflows in the real estate sector in southern provinces and cities would continue rising in the near future.

The association explained that private investors have injected money into the property sector in recent years. Besides, investment funds and foreign businesses have increased investment in Vietnam’s property sector via stake acquisitions, partnerships with local firms and lending.

Real estate has been among the three biggest absorbers of foreign direct investment over the years.

Incoming remittances to Vietnam stand at some $10-13 billion per year. This year’s incoming remittances are estimated at $5.7 billion in HCM City with 21 percent going to the housing sector.

However, HoREA warned that huge bank loans and private capital have been poured in the property sector, with a focus on big firms, and the number of investors on the secondary housing market has surged.

Market watchers expressed concerns over an increase in property credit though HoREA said a real estate bubble will unlikely occur next year.


Category: Finance, Vietnam

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