Vietnam Daily News

New government rule bodes well for realty market

Written by Dailynews.vn Tuesday, 20 December 2011 16:22

A new prime ministerial instruction which orders local lenders to hold back credit growth, especially in the property sector, is seen as a positive thing by many realty companies which have been struggling with a stagnant market.

"The move is a positive signal for the local realty market," said Le Hoang Chau, chair of the HCM City Real Estate Association (Horea).

Besides loosening credit for building houses for sale or lease to low-income people and workers in industrial parks or accommodation for those in need of housing, the prime minister also requested banks to review and continue lending to projects which will be completed and sold next year.

However, banks will restrict lending money for compensation and site-clearance purposes and new projects as well as high-end property schemes while putting lending to firms or individuals involved in realty business under tight supervision.

Echoing the views of numerous real estate trading firms, Dang Duc Thanh, general director of Can Nha Mo Uoc Investment JSC, said the prime minister's instruction had sent a good signal to help ease the shortage of funds in the market.

To some extent, tightening credit to new projects will partly reduce supply in the short term, helping unsold condos. Based on unofficial figures, there are around 200,000 apartments in both small and big schemes nationwide, with around 50,000 unsold in HCM City.

Meanwhile, a survey by Cushman & Wakefield indicates that there have been about 13,000 condos released into the market in HCM City this year alone. The survey also said that the current supply is predicted to satisfy demand in the next 3 years.

Public confidence recovers

A large number of real estate enterprises believe that credit loosening for projects close to completion will make no sense in the context of slowing housing demand. In other words, it is hard for the market's liquidity to be improved since buyers have yet to recover their confidence in the market.

Tran Minh Hoang, chair of Vinaland Limited, said that the market now focuses on liquidating securities offered by lenders who are trying to take back their principles from their cash-strapped borrowers.

The biggest risk of industry players is when they cannot sell products to service bank loans but at the same time have to deliver finished products to homebuyers as scheduled.

Numerous developers undergoing huge financial pressure are forced to offer products at discount prices but no one wants to buy them, Hoang said.

Hence, he supposed that lowering lending rates to support homebuyers is the key to the problem.

A few experts forecast that lending rates will go down next year but how much they will decline depends on future market movements.

Source: www.intellasia.net/news/articles/business/111351419.shtml