Lending rates too high for property

According to director of Savills Vietnam’s Hanoi branch Mathew Powell, only 10 per cent of clients at apartment projects (with Savills Vietnam acting as sales agent) took their apartments as collateral to secure bank loans amid soaring lending rates.

In fact, most customers who took the property they bought as collateral to seize bank loans were end-users but not speculative property investors. In most cases, they could pay off up to 50-70 per cent of the property value and only took loans to offset the shortfall.

A financial specialist Dr. Dinh The Hien commented that a round sum would be required to procure housing. With current high bank lending rates, customers could hardly pay off the interest, let alone the original debts, unless they were high-paid employees.

Financial specialists argued that buying houses with payment by installments would be feasible, if the lending rate was pulled back to 8-10 per cent per year only. The current high lending rate has driven the property market into stagnancy.

Supportive of the idea a representative from the property firm Colliers International said that financial sources from banks were an impulse to property market development. With current high lending rates, customers needed to think twice before deciding whether to take bank loans when buying a property.

At this point in time, many local banks such as Vietcombank, Vietinbank or ACB are welcoming individual customers to take on loans for housing needs. They willingly shake hands with property developers to offer loans of up to 70 per cent of property value with 10-15 years repayment terms. However, their efforts have generated little effect.

Hoang Anh Hung, a property investor said the liquidity in the apartment market segment was rather low due to high lending rates.

“In some previous years, it was easy to get money rewards through taking short-term bank loans to invest in apartment buildings. Profit margin sometimes reached 40-50 per cent of investments,” he recalled.

CBRE Vietnam’s executive director Richard Leech also pointed out that, “Current high and strongly volatile lending rates have cushioned capital inflows into property markets.”