The real estate market may soon explode because of the cheap capital flow

21-Jan-2021 Intellasia | Dau tu Chung khoan | 6:02 AM Print This Post

Deposit rates were low, savings tended to shift to other investment channels and real estate became the bright spot.

Real estate took the throne

Maturing the savings book worth more than 6 billion dong of 13-month term at Bac A Commercial Joint Stock Bank (Bac A Bank), N.V.K in Ba Dinh, Hanoi was quite surprised when the bank staff reported that the deposit interest rate had dropped sharply. Immediately phoning an employee of another bank that he used to send a savings, K received the same information, even at this bank he was not given a gift like before.

Normally at that time, customers could receive full of gifts when making banking transactions. Especially, the incentive programmes for VIP clients was quite plentiful, but this year there was very little, said N.V.K.

Due to low deposit interest, K decided to withdraw money to calculate a better profitable investment plan, even though the bank staff was very clinging because she did not want to lose her real customer. Some friends had advised N.V.K to invest in stocks, but because he was not financially insecure with the arid and somewhat tricky numbers, he decided to learn about real estate.

Bringing the above story to Nguyen Duc Huong, former Chair of Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank)’s Board of directors with many years of experience as a bank leader and very knowledgeable about the financial market, the reporter of Securities Investment Newspaper received a quite suprising answer.

Although banks still reported profits in 2020, even many banks still had high profits, until 2021, they would really suffer from the damage of outstanding loans, the difficulties in mobilising and lending. Hence, investors should carefully consider when holding bank shares, Huong acknowledged and added that the stock channel was currently absorbing cash flow strongly. However, after Q1/2021, the real estate investment channel would take the throne.

With land buying, no matter how low the price was, land was still land. When the population increased, the land price would rise again, but when the stock burst, it was just paper, Huong analysed. That comments had a strong impact on the Vietnamese investors’ psychology. Regardless of the period, there was always confidence in the increase in price of real estate, especially when the population was increasing, land was becoming more and more narrow. Even in the medium and long term, real estate was also a good profitable channel. Thus, in this period, anyone who could borrow from banks should use to buy a house or land, because the lending interest had never dropped to such a low level at present, Huong emphasized.

Sharing with the Securities Investment Newspaper, Nguyen Tuan Anh, director of the Credit Department of Economic Sectors, the State Bank of Vietnam (SBV), also said that when the economy was affected by the Covid-19 pandemic, many sectors had encountered difficulties. Savings channels had been no longer attractive because interest rates fell sharply. Real estate had become one of the investment channels receiving much attention.

Credit focused on serving real needs

Tuan Anh analysed, the structure of real estate credit included credit for real estate business and credit not for real estate business (serving people’s housing needs and self-using needs of enterprises).

He said that by the end of 2020, real estate business credit had increased in both growth rate and proportion compared to the end of 2019, although the growth was not strong. Besides, the growth rate and the proportion of consumer credit/self-use credit of real estate decreased.

Specifically, in terms of growth, real estate business credit as of December 31, 2020 increased by 13%, higher than the rate of 12.82 percent in the same period in 2019. Consumer and self-using real estate credit increased by 8.4%, significantly lower than 26.32 percent in the same period in 2019, mainly due to the sharp decrease in demand for loans to serve real estate-related needs as people had tightened spending.

In terms of proportion, real estate business credit accounted for 35 percent of the total real estate credit balance. Although this proportion increased slightly compared to the same period in 2019 with the figure of 33.74%, it decreased sharply compared to 2017 at 45.63 percent and 2018 at 35.49%. Consumer credit/self-using real estate credit accounted for 65 percent of real estate credit, slightly decreasing compared to the same period in 2019 with the figure of 66%, but generally tending to increase when the proportion in 2017 was 54.37 percent and in 2018 was 64.51%.

The above data showed that credit institutions had closely and strictly followed the instructions of SBV to control lending for real estate business. At the same time, the real estate credit structure of credit institutions had also been adjusted towards focusing on serving the housing needs of people, Tuan Anh said.

Where was the attractive segment?

It was challenging to calculate which segment to invest effectively, N.V.K. That was also the common belief of anyone when starting to learn about real estate because of the diversity as well as the specificity of each real estate segment.

A recent study by Savills said that by 2021, the direction of the cash flow into the real estate market would change. According to Savills, amid the negative impacts of the Covid-19 epidemic, industrial zone’s real estate emerged as a bright spot thanks to the trend of foreign investment shifting into Vietnam.

In addition to the prospects of industrial park’s real estate, resort real estate combining ecotourism, entertainment and health care was also appreciated for potential exploitation in the near future. In order to get immediate profits, apartments and land plots were the two segments mentioned.

Also, answering the question of what real estate segment was attractive these days, Nguyen Duc Huong said, the land on the edge of Hanoi, HCM City and suburban areas around these two cities would be crowned thanks to the speed of urbanisation. Next was the land in Long Thanh, Dong Nai, Thu Duc and the places designated as ‘special zones’ would be very appealing in the next five years with urban planning effects.

Moreover, after the Covid-19 epidemic, there would be a boom in resort tourism because people in the whole world was in the social distancing for too long. Thereby, resort real estate (sea, mountain) would ascend to the throne and followed by industrial real estate (export). However, Huong added that this would depend on the results of the money manipulation dispute.

That was Huong’s investment opinion and working direction.

The capital inflows to real estate in the near future were from five activities, including credit, private investment, foreign investment, corporate bonds and Fintech. According to Huong, these capital flows would continue to flow strongly into the real estate market when the economy entered the recovery period after the Covid-19 epidemic.

Regarding the real estate credit policy of the management agency in 2021, Tuan Anh said that based on the direction of the government and the prime minister, SBV would manage the credit policy applied to the real estate sector in a flexible direction, consistent with the general orientation and developments of the real estate market, contributing to the development of a stable and healthy market.

Tuan Anh also informed more about the quality of real estate credit with the non-performing loan ratio (NPL) estimated to reach 1.85 percent by December 2020. Although this figure was 1.58 percent higher than December 2019 due to the impact of the Covid-19 epidemic, it had decreased significantly compared to 2017 by 2.48 percent and in 2018 by 1.95%.


Category: Finance, Vietnam

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