State Bank of Vietnam Credit Package Aims to Support the Housing Market

February 5, 2015 Posted by Vietnam Briefing Reading Time: 4 minutes

HANOI – The Deputy Minister for Vietnam’s Construction Ministry, Nguyen Tran Nam, has announced a proposal for the State Bank of Vietnam (SBV) to support the commercial housing market through a VND50 trillion (US$2.3bn) credit package. The package would supply loans of seven percent interest per year for the first decade, followed by a potential extension for a five or ten year period, with an interest rate adjusted according to market rates.

Bank lending for real estate purchases rose to VND300 trillion (US$19.1bn) in 2014, beyond the previous 2008 high of VND280 trillion (US$13.3bn). Fifteen banks have been given permission to extend loans for social housing from an existing VND30tr (US$1.4bn) loan package announced in 2013.

Vietnam’s real estate market was buoyed in 2014, when Hanoi saw close to 11,450 real estate transactions conducted, double that of 2013. In Ho Chi Minh City, approximately 10,350 transactions took place, a 30 percent increase over 2013. The real estate sector has been particularly attractive to Hong Kong investors, who invested US$2.5bn in 45 real estate projects in 2014.

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The SBV has begun 2015 by attempting to clean up the over-crowded banking sector, chief among the SBV’s strategies is the promotion of mergers. In an SBV briefing note reportedly seen by Reuters in January 2015, Vietcombank may merge with the unlisted Saigon Bank for Industry and Trade, and VietinBank may merge with the unlisted OceanBank. While there has not been any official confirmation of the aforementioned mergers, the SBV has taken over the loss-making Vietnam Construction Joint Stock Commercial Bank (VNCB) (reportedly paying no money for the transaction), and has requested that Vietcombank manage it.

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In November 2014, Vietnam’s National Assembly set a target of reducing the amount of non-performing loans in the country’s banking sector to three percent by the end of 2015. As of the end of the third quarter 2014, non-performing loans stood at 4.7 percent. The Vietnam Asset Management Company (VAMC), established to clean up such bad debts, purchased close to VND123 trillion (US$5.85bn) in 2014. VAMC has announced plans to purchase a further VND70-100 trillion (US$3.3-4.7bn) in 2015.

With a strengthened banking sector and increasing availability of real estate loans, Vietnam holds many opportunities for real estate investors. The sector is slowly opening up to foreign investors; changes to the Housing Law, which come into effect on July 1, 2015, will grant foreigners with a valid entry visa the right to a 50-year leasehold tenure in Vietnam, and will allow foreigners to own up to 30 percent of the apartments in condominiums, and up to 250 houses in many ward-level areas.

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