Logo of Phnom Penh Post newspaper Phnom Penh Post - Experts: Tightening luxury home credit may hit market

Experts: Tightening luxury home credit may hit market

Content image - Phnom Penh Post
Policies must promote real estate market development while limiting risks. VNECONOMY/VIET NAM NEWS

Experts: Tightening luxury home credit may hit market

IF credit policies for luxury home purchases were tightened, it could be a shock for the Vietnamese property market, experts have warned.

The State Bank of Vietnam plans to apply a credit risk ratio of 150 per cent for loans to purchase homes worth from three billion dong ($126,000) – three times higher than the current ratio, according to a draft circular about limits and safety ratio for banks’ operation recently made public.

The central bank said limiting loans for luxury home purchases aimed to ensure the sustainable development of the real estate market and safety of the banking sector.

According to financial and banking expert Nguyen Tri Hieu, increasing the credit risk ratio would push up lending interest rates for luxury home purchase loans, which would harm the liquidity of this segment.

Vietnam Real Estate Association deputy secretary-general Nguyen Van Dinh said tightening credit for luxury home purchases could help direct market demand more to the medium segment.

Although the development of the medium housing segment needed to be encouraged, it was not necessary to sacrifice the luxury segment, Dinh said, because the market still had demand for luxury homes, especially from foreigners.

The real estate market and the high-end segment in particular recently did not see any unusual developments, Dinh said, stressing that it was not necessary to tighten credit policy for luxury home purchases.

If this policy for luxury home purchases must be applied, the central bank should consider an appropriate length of time for the policy, he said.

Dinh added that if the policy was applied for a long time, it would seriously affect the development of the high-end segment while Vietnam was trying to improve infrastructure quality and living standard.

Policy making needs careful consideration to ensure the balanced development of the real estate market, he said.

Nguyen Anh Tuan, deputy chairman of property developer HD Mon Holdings, said most buyers of luxury homes used banking credit for the purchases, stressing the important roles of interest rates and credit policies in boosting liquidity of housing projects.

Tightening credit policies for luxury home purchases would create a market shock with several consequences amid a slow-down in supply and liquidity, Tuan said.

Tuan recommended that banks evaluate the financial capacity of buyers to decide the loans, instead of applying the policy for the whole high-end segment.

Appropriate roadmap

The Vietnam Real Estate Association proposed the central bank raise an appropriate roadmap for tightening credit for the real estate market.

The association said credit policies could be tightened for land purchases which were mainly for speculation while it was not necessary to tighten credit for housing purchases because they could stimulate other industries such as construction, cement and steel production.

It was more important to consider the affordability of buyers, the association’s president Nguyen Tran Nam said.

Economist Vo Tri Thanh said tightening credit for luxury home purchases would cause difficulties to developers in the short term, but for the long term, it would help the market develop in a healthier way.

Thanh said a challenge for policymakers was promoting market development but at the same time reducing risks.

“Don’t rush to conclude that tightening credit will negatively affect the real estate market. Monetary policy could ensure a healthier development for the market. If there is no strict control, it might lead to bubble burst which would affect the entire economy.”

According to Nguyen Manh Khoi, deputy director of the Housing and Real Estate Management Department under the Ministry of Construction, each market segment needed different policies.

The draft policy aimed to prevent overheated development of the high-end segment because this segment was the most affected by crises, Khoi said.

As banking credit for real estate was tightened, Khoi also urged developers to seek other capital sources, such as from buyers, foreign partners and securities and bond markets.

Tightening real estate credit was an opportunity for developers to restructure their products and capital as well as redefining their development strategies, Khoi said.

From the beginning of this year, the ratio of short-term capital used for long-and- medium-term loans was reduced from 45 per cent to 40 per cent and credit risk ratio for real estate loans raised from 150 per cent to 200 per cent.

In the draft circular, the central bank planned to reduce the ratio of short-term capital used for long-and-medium-term loans to 30 per cent in 2021 or 2022. VIET NAM NEWS/ASIA NEWS NETWORK


  • Tourists urged not to skip trip

    The Ministry of Tourism has called on international tourists not to cancel trips to Cambodia, but urged them to adhere to several dos and don’ts when arriving in the Kingdom during the Covid-19 pandemic. The ministry released an eight-point instruction manual on Wednesday published

  • The taxman cometh – Cambodia’s capital gains tax casts the net on individual taxpayers

    In a country where only limited personal income tax existed, the new taxation law beginning January 1, 2021, will make taxpayers out of Cambodians, whether they are ready for it or not About two years ago, a little known amendment was made to Article 7 of the Law

  • Cambodian-American gets Star Trek treatment

    Kevin Ung, a Cambodian-American whose family escaped genocide during the Khmer Rouge’s reign of terror, was recently selected from thousands of applicants to participate in the Television Academy Foundation’s inaugural 2020 Star Trek Command Training Programme, a course intended to give hands-on filmmaking experience

  • Cambodia seeks to be transport hub

    Cambodia is working on several fronts to modernise its transport infrastructure and services, concentrating on opening new international gates to relieve and balance traffic congestion at its borders, Minister of Public Works and Transport Sun Chanthol said on Thursday. This is part of the Kingdom’

  • PM: West unfair to Cambodia

    Prime Minister Hun Sen released a message celebrating the International Day of Peace on Monday, saying that some major powers and western countries had been systemically cooperating to put political pressure on Cambodia as they did in the 1970s and 1980s. Hun Sen said pressuring

  • Singapore Fintech start-up enters Sihanoukville

    Singapore-based fintech start-up Fincy on Wednesday announced the expansion of its cashless payment system to Sihanoukville to tap into the southwestern coastal city’s ever-widening business and investment landscape. The move is in line with the National Bank of Cambodia’s (NBC’s) recommendations to