With tightened bank lending for real estate, large numbers of buyers are selling to cut losses.
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| Real estate trading floors have been quiet in recent months |
However, increased availability of stocks will not necessarily meet huge existing demand, as potential house buyers are facing increasing difficulties due to high interest rates.
Speculators cut and run
Due to difficulties in raising capital for their investment, many real estate buyers are trying to give back land and housing to developers.
Mr. Binh is finding ways to return a land lot in Ho Chi Minh City’s Binh Chanh District to the developer, despite having already made a payment of 40% of the plot’s value. He has even decided to turn down a deferment offered by the investor.
“I’m searching for finances, but decided to terminate the contract,” Binh said.
Bigger investors have also been compelled to narrow their investments.
Mr. Minh, who has contributed capital to buy 15 apartments in a District No. 7 real estate project, said he had received approval from the investor to return 10 apartments. In the meantime, he has had to settle payments on the remaining five.
Few new customers
While real estate investors are struggling to make sales, a large number of banks are finding ways to minimise real estate lending.
Some years ago, banks pledged to provide clients with 80% or even 90% mortgages for 25 years, but this is not the case this year.
A general director of a commercial bank in District No. 1 of Ho Chi Minh City said the bank would provide only 40% or 50% of the total value of the housing for clients to buy an apartment over a 10-year period.
“This is a technical barrier to reduce real estate lending as a few clients can meet the bank’s requirements,” he said.
Other banks have opted to increase lending interest rates to discourage clients from borrowing. A leader of another commercial bank said their outstanding non-production loans had decreased from 40% to 29% due to higher interest rates.
Interest rates of 25% per annum can be found, double those of just two years ago, severely hampering lending.
Another way to reduce non-production lending has been to promote production credit. However, several banks have found it hard to reach their goals due to the State Bank of Vietnam’s credit growth cap of less than 20% for this year. Firms are also hesitant to borrow at such high interest rates.
Real estate value declines
Tighter lending and less speculation have seen land and housing prices in Hanoi fall.
Several real estate companies have been offering promotional programmes to counter the slump in sales. Viet Hung Urban Investment and Development JSC, investor in the Ecopark ecological urban area, have offered buyers a 10% discount since May 20. The Golden Land project has followed suit, offering discounts of between 3% and 6% since mid-May.
Falling land prices
Land prices in the Kim Chung-Di Trach urban area project have dropped VND10 million (USD485) per square metre, while Geleximco decreased by between VND6 million and VND12 million (USD291-USD582) per square metre.
Prices for villas in the Tan Tay Do project have fallen to VND30 million and VND35 million (USD1,455-USD1,698) per square metre. In late March, they were offered at around VND55 million (USD2,668) per square metre.
Land prices in Thac Ban have decreased by between VND2 million and VND7 million (USD97-USD339) per square metre.
