Real Estate Receives Boost from Banks

Many large banks decided to adjust down their deposit rates, opening a great opportunity for the real estate market to receive a new wave of investment. Compared with the end of 2014, deposit interest rates of banks such as Techcombank, Vietinbank, Agribank, Eximbank and Sacombank have fallen 0.1- 0.5 percent in both short-term and long-term cycles.

 

Interest rate for deposits with over-12-month term currently is within 6,4-7,2 percent/year; for deposits from 6 - 12 months is 5,4-6.5 percent/year; deposits from 1-6 month is 4.5-5.4 percent/year; less than 1 month or demand deposits’ interest rate remains 0,8- 1 percent/year.

 

According to experts, banks’ adjustment of interest rates in the first phase of 2015 has had a positive impact on the recovery of real estate market. Deposit interest rate reduction will encourage investors to withdraw savings to invest in real estate market, this is one of the reasons behind the high liquidity in real estate market currently.

 

The prosperity of real estate market is reflected through statistics of the Ministry of Construction. The rate of successful transactions in the market in March and in the first quarter of 2015 increased three times year-on-year. Particularly, in March, Hanoi had about 1,500 successful transactions, up 25 percent compared to February. As a whole, the first quarter of 2015 had 4,250 successful transactions (a three-time increase year-on-year). By the end of March, the total inventory of real estate in Hanoi was about VND9,006 billion (down VND8,054 billion or 47.21 percent compared with the first quarter of 2013).

 

In Ho Chi Minh City, the number of successful transactions was also quite high with approximately 3,950 transactions in the first quarter (3-fold increase year-on-year). By the end of March, the total value of real estate inventory in Ho Chi Minh City was about VND14,057 billion (down VND14,685 billion, or 51.09 percent compared with the first quarter of 2013).

 

Besides lowering interest rates, banks also adjusted lending rates to be more “breathable”. For individuals and businesses participating in real estate market, the common level rate for short-term loan is around 7- 9 percent/year, medium and long-term loans is about 9.5 - 11 percent/year.

 

Currently, many banks are introducing preferential loan packages for homebuyers, which in turn increases credit balance in real estate sector. By January 2015, credit balance was at VND316,578 billion (up 20.7 percent compared to that of December 31, 2013 and 4.8 percent compared to that of December 31, 2014).

 

Along with efforts from the government to recover real estate market, banks’ latest move also contributes significantly to remove bottlenecks in the financial sector and unfreeze capital market flows in real estate which have been blocked recently.

 

Although the liquidity of real estate market has been improving remarkably, unfortunately this positive trend does not happening evenly in all segments but instead concentrates in the condominium segment, especially in projects with good infrastructure. In Ho Chi Minh City, projects with beautiful locations and good infrastructure have been showing signs of rising prices.

 

Meanwhile in Hanoi, projects of good locations even though still on the way to finishing, price have increased by about 1 - 3 percent. In districts like Long Bien, Hai Ba Trung, Dong Da, Cau Giay and Tu Liem, the increase level is around 3- 5 percent, some projects even rise up to 10 percent.

 

With the new developments of real estate market, many people expect in the near future, the market will continue to maintain growth momentum. According to many experts, in the coming time, the market will continue the trend of concentrated growth in some segments only. Lower interest rates will serve as a lever for the market but lending rates are still high compared to income levels of the majority of people. Therefore, the lower the interest rate tends to have a gradual effect on the real estate market rather than an immediate one as in the case of stock market or some other markets.