VietNamNet Bridge – The latest report by Vietnam Report
shows that 60 percent of commercial banks say they will tighten procedures for
lending to the real estate sector, while 20 percent of banks say they will
tighten the procedures for providing long term loans.

According to
the report on the real estate market in 2011 released on March 18 by Vietnam
Report, the majority of banks will restrict lending to the real estate sector.
As such, the capital flow to the property market will be blocked after the
government announced the plan on restricting loans to non-production sectors
and commercial banks committed not to pour much capital into the real estate
sector.

Experts
believe that with the banks’ decision, the real estate market will cool down
and the real estate prices will decrease, thus making land and houses return to
their actual values.

However,
while the move by commercial banks and the increasing supply are believed to
force the real estate prices down, people still expect to see the prices going
up, and the demand for loans to develop real estate projects keeps rising.

According to
CBRE Vietnam, a real estate service provider, the housing market in 2011 will
witness the rising supply. The city will have 16,000 high grade apartments,
which is equal to the total supply in both 2009 and 2010. Meanwhile, Vietnam
Report’s survey shows that up to 67 percent of enterprises believe the supply will
go up rapidly, and only 33 percent think the supply will go up step by step.
Regarding the real estate price in Hanoi,
61.7 percent of consumers believe that the real estate price will keep rising.

It is
understandable why the demand for real estate credit would be high. Bank loans
remain the main source of capital for real estate developers to run their
projects. Meanwhile, people’s expectation about the rising prices will have
influences on the decisions on whether to borrow money from banks. Everyone
believe that the prices would go up further. Wealthy people want to borrow
money from banks to speculate in real estate, while those people who really
have the demand for accommodations, cannot access bank loans because of overly
high interest rates.

It seems that
the real estate market is now witnessing contradictory signals which lead to
different predictions about the market. On the one hand, the fact that tightening
credit leads to predictions that the real estate prices would go down. On the
other hand, the market’s signals show that the demand keeps increasing, thus
leading to the prediction that the prices would be still high.

Meanwhile, though
there is information that commercial banks will restrict lending to the real
estate sector, real estate developers remain optimistic about their business.

“My
understanding is that tightening real estate credit does not mean that banks
absolutely will not provide loans to fund real estate project development. They
will still pour capital if they find the projects feasible,” said Tran Minh
Hoang, Chair of Vinaland.

“Though
people predict that 2011 would be a difficult year for real estate companies, I
still believe that a breakthrough will be made by our company in 2011. We plan
to kick off Vinaland Tower project in HCM City
later this year,” he said.

Though Le Chi
Hieu, Chair of the Thu Duc Housing Corporation, admitted that the tightening of
real estate credit would cause difficulties to real estate developers,  he still believes that the macro economy would
be better in the second half of the year, which will help the real estate and
securities markets recover well.

According to
the State Bank of Vietnam,
by December 31, 2010, the outstanding loans to the real estate sector had
reached 228 trillion dong, an increase of 23.5 percent in comparison with the
same period of the last year.

Phuong Thao