Real estate loan tightening warns of price fever because of lack of supply

Supply decreased due to tightening capital poured into real estate

In the context of the real estate market showing signs of hot growth, the State Bank (SBV) has asked credit institutions to strictly control credit growth in accordance with the targets assigned by the SBV. in 2022. This is also in line with solutions for monetary policy, credit, banking activities of the Government and the State Bank.

According to economic experts, the “tightening” of credit flowing into the real estate sector, in addition to the purpose of preventing bubbles from bursting, also has the goal of reducing house prices and limiting land fever.

However, many experts fear this could have the opposite effect.

Mr. Dang Hung Vo – former Deputy Minister of Natural Resources and Environment said that this credit tightening will further reduce the supply and cause more price fever. The reason is that it is difficult for investors to access capital to develop the housing supply.

To remove this situation, according to Mr. Vo, it is very necessary for the Government, provinces and cities to review all existing projects. Any projects that need to tighten credit, especially projects formed in the future, need to be tightened. Any project that has been formed in practice and investors with good capacity are boldly disbursed.

“The Government and the People’s Committees of the provinces need to review the projects and see which ones are being implemented. If any projects have not been implemented yet, if they are products to be formed in the future, they may consider suspending credit granting for fear of being afraid of providing credit. As for housing projects, it is possible to create 100% real house supply in the short term about 6 months and still continue to provide appropriate credit to create a housing supply for the market,” said Mr. Vo. .

Meanwhile, Mr. Le Huu Nghia – Vice Chairman of Ho Chi Minh City Business Association (HUBA) shared, the current real estate market is led by real estate businesses. Meanwhile, according to market rules, it must be led by buyers. Because people do not have products, they have to buy everything the market has to offer. And that’s why home prices are getting higher and higher.

Mr. Nghia added that, for almost three years now, the supply in the market was very limited and decreased continuously over time. Meanwhile, it is difficult for businesses to reduce house prices because land prices in many areas have doubled in the past two years in the past two years.

In addition, the calculation of land use fees is very difficult, there are projects that have not been able to pay land use fees for 10 years. Therefore, businesses do not have input data to come up with a reasonable selling price.

Real estate prices continue to soar

In the past few months, the real estate market in Ho Chi Minh City has had changes when the tightening of capital to pour into real estate has been implemented.

According to the Vietnam Association of Realtors (VARS), the tightening of capital into real estate, especially the bank credit channel and corporate bonds, is a relatively clear signal from the agencies. function.

Regarding bank credit, by the end of the first quarter of 2022, real estate credit outstanding reached VND 2.23 million billion, an increase of 2.24% compared to the beginning of the year, much lower than the increase of over 5% of outstanding loans. general use of the economy. The growth rate of real estate credit balance has slowed down after many years, as a result of controlling and tightening the source of money pouring into this industry.

In addition, bank credit to finance real estate business currently accounts for only about 35% – equivalent to VND 0.78 million billion, most of which are loans to buy and repair houses.

Thus, the source of bank credit for real estate business (investment in real estate projects) not only decelerated, but also decreased in proportion. Real estate businesses that want to maintain a normal growth rate are forced to find other sources of capital.

Besides, from the beginning of 2022, real estate prices also continuously escalated in many segments. According to VARS, the housing market in Ho Chi Minh City witnessed a sharp increase in prices from 5-10% within just one month. In the situation that raw material prices tend to increase sharply due to geopolitical instability, the capital needs of real estate businesses are becoming more and more urgent. Supply growth may be negatively affected by the policy of “locking the valve” on credit and corporate bonds.

Blocking familiar sources of finance (bank credits and corporate bonds), while attracting funds from other financial products (real estate investment funds – REITs, Housing Provident Funds, securities securitization of real estate…), or another channel (foreign direct and indirect investment) takes a long time to operate properly, causing the supply of real estate to be tight, pushing prices up by one unreasonable way.

According to VARS, the authorities, besides protecting individual investors in the high-risk financial market, need to have policies to protect genuine real estate businesses. Capital needs to be unlocked for all industries in the economy, including real estate.

Issuing corporate bonds in general and real estate bonds in particular, in addition to strictly controlling issuers, needs a mechanism to minimize the participation of individual investors. vulnerable people who lack knowledge and experience. The game with corporate bonds should be a game between businesses and financial institutions such as banks and professional investment funds and operates according to the market mechanism.

In addition, it is also time for the authorities to propose more open regulations for businesses to attract foreign capital, as well as effective investment products such as real estate investment funds (REITs), securities securitization of real estate, housing savings fund…