Increasing credit flows may spark another real estate bubble, PM tells May government meeting.
Concerns over increasing credit flows again causing a real estate bubble were raised by the Prime Minister at the government’s May meeting. With the recovery of the real estate market, he said, the banking sector needs to carefully control investment credit and ensure transparency in order to avoid a market collapse.
Capital from banks has been a major contributor to the recent recovery of the real estate market. A report from the Ministry of Construction (MoC) showed that in the first quarter credit provided to real estate reached VND316.57 trillion ($14.51 billion), an increase of 20.7 per cent against the end of 2013 and 4.8 per cent against the end of 2014.
Mr. Nguyen Hoang Minh, Deputy Director of the State Bank of Vietnam’s Ho Chi Minh City office, told VET that growth in credit for real estate in the City in the first five months increased 4.5 per cent compared to 2014 and outstanding credit for real estate in the City now accounts for 13 per cent of the total.
Commercial banks have been focusing intently on the market. VPBank recently issued a credit package of VND5 trillion ($229.2 million) with preferential interest rates starting at 6.99 per cent per annum for customers to purchase land and houses.
BIDV has recently set aside VND2 trillion ($91.68 million) for home loans at interest rates from 7 per cent per annum
Vietcombank, meanwhile, has a credit package in place worth VND10 trillion ($458.4 million) with an interest rate of 7 per cent per annum for small and medium-sized enterprises and individual customers wishing to buy or upgrade houses.
Commercial banks have also increased their cooperative efforts with real estate developers to build complexes with resorts, golf courses, villas and entertainment facilities, such as FLC Quy Nhon, with total investment of VND3.5 trillion ($160.44 million), in which BIDV Chairman Tran Bac Ha committed that the bank would provide credit for 70 per cent of the total.
HDBank, meanwhile, has worked with the G5 company in providing credit of VND1 trillion ($45.84 million) for one of its projects.
Banking expert Mr. Nguyen Tri Hieu, however, said that there is no chance of a bubble reappearing because lessons have been learned regarding controls over borrowing and commercial banks now more carefully manage their credit flows, especially to real estate.