The move is blamed for one of reason of halt in some segments of the realty market.
Specifically, borrowers will suffer 11 percent a year in Eximbank when they loan to build house or buy an apartment. Some banks including OCB, SHB, VietCapital Bank have raised interest rates fluctuating from 11.5 percent to 12 percent for lending in commercial real estate while their peers like Sacombank and VietABank lifted to 12.5 percent a year.
Banks not only raise interest rate but also give half of the property cost to prevent drastic rise of credit and bad debt in the hiking land prices last time.
Last but not least, many banks assess the property carefully before giving loans; they just provide loans for land projects with certificates. Worse, some stopped loans for buying property after “land fever” in some outlying districts in the city.
Banks’ control over property loans makes small investors stop their business. Mr. Hung An in Binh Thanh District said early 2017, he was provide a loan of VND1 billion to buy a land at VND1.5 billion; however, now, banks just agreed to give him VND700 million with interest rate of nearly 12 percent resulting in a halt in his business.
Similarly, Ms. Minh Hang in district 3 stopped investing because banks lifted interest rate.
Khang Thinh Property Group said that last time, most investors bought lands in outlying districts 9 Binh Chanh, Nha Be to sell to others for profit. However, banks have tightened control over loans for buying land and apartment condo, realty estate market has therefore seen a pause.
At present, banks have no longer provide mortgage loans to purchasers of real property when buyers mortgage land in “fever land” but house and land in stable residential quarters in districts 1, 2 and Binh Thanh.
Banks’ policies of tightened loan has certainly affected investors especially those who buy house for living because there has been no loan program with preferential interest rate like before, said the representative from Khang Thinh Property Group.
Whereas a leader of Phu Dong Group said that housing enterprises no longer have preferential policy for small investors but real consumers who buy an apartment for living. Nonetheless, real consumers are unable to afford the house because increased bank loans and difficulties in accessing to credit sources. That’s why there has been a setback in condo sale lately besides fire in Carina condo in March hurting the market.
Learning from lesson of credit on property ten years ago, the State Bank of Vietnam (SBV) has set its sights on 17 percent credit growth this year as well as requested institutions to close monitor credit growth.
Credit institutions were asked to place manufacturing and business on the top priority but limit loans for property, stock and supervise consumer loan borrowers who actually invest in realty estate and securities.
Along with this, the central bank also required stricter policies to tighten property loans such as decreasing rate of short-term capital for medium and long-term loan from 60 percent to 45 percent.
Deputy director of the central bank in Ho Chi Minh City branch Nguyen Hoang Minh said that property credit stood over 30 percent ten years ago in the city but now it has stood at 10 percent within three recent years.
The central bank frequently issued warning asking banks to strictly follow its warnings and just accept loans for investors with financial capacity. Therefore, the rate of bad debts in realty estate loans in HCMC is 2 – 2.5 percent.
Though property credit surplus is under good control, economists said the government should take heed to high consumer credit surplus because most of consumer loans poured in investment of land and house.
Statistically, consumer credit in 2017 leaped drastically, three or four times higher than the country’s average credit growth. HCMC alone, property credit stood at 10.8 percent with surplus of VND1.75 million in 2017; hence, loans in realty estate was then around VND198 trillion.
In late March, 2018, consumer surplus in HMC was VND220,000 billion and 28.7 percent or VND63.140 billion of which was realty estate loans.
Accordingly, VND261,140 billion poured into realty estate in HCMC. Compared to previous year, capital into property increased by VND15,140.
The National Financial Supervisory Commission of Vietnam predicted a continued surge in consumer loan in 2018. Consequently, the risk of property loans by borrowing consumer loan still exist.