WORDS ON THE STREET 70th anniversary of Hanoi's Liberation Day Vietnam - Asia 2023 Smart City Summit Hanoi celebrates 15 years of administrative boundary adjustment 12th Vietnam-France decentrialized cooperation conference 31st Sea Games - Vietnam 2021 Covid-19 Pandemic
Home / Economy / Real estate
Delicate balance needed to address Vietnam’s property risks: HSBC
Hai Yen 09:36, 2021/06/20
The housing market may run away from economic fundamentals.

The State Bank of Vietnam (SBV) is facing a delicate balance of curtailing excessive lending to real estate developers while reducing imminent Covid-19 risks to the sector, according to HSBC.

Referring the property sector as an increasing source of growth for Vietnam, the bank in its latest report noted real estate activity in the country accounts for 8% of the GDP, while the ratio in ASEAN is between 5% and 15%.

 More restrictive macro-prudential measures would require if the property market shows more signs of overheating. Photo: Minh Long

“The memory of a housing bubble of 2007-12, which ultimately led to a prolonged banking crisis, looms large in the collective conscience. Even after a gradual recovery in the banking sector, real estate loans continue to account for a large proportion of bank balance sheets,” noted the HSBC.

While some banks do not have a specific classification on loans to the real estate sector, balance sheets of the “Big-4” SOE banks [Vietcombank, Vietinbank, BIDV, Agribank] reveal a key linkage with the associated construction sector, stated the bank.

As the real estate market has been hit by the pandemic, there are signs that it is recovering. Although output fell in year-on-year terms in the second and third quarters of last year, it registered a strong rebound from the fourth quarter.


Meanwhile, property prices continue to rise, partly due to accommodative monetary policy that offers low-interest rates and abundant liquidity, along with a sharp rise in the price of luxury condos, growing 9% year-on-year 2020 vs. a 4-5% price increase in the mid-end and affordable segments.

Demand for luxury and high-end properties remains elevated, with their market share increasing from less than 30% of total units sold in 2019 to more than 70% in 2020.

According to the HSBC, FDI data suggests that even though new FDI inflows into the real estate sector increased more than 200% year-on-year as of May, FDI was largely concentrated in manufacturing.

“This means that price rises are mainly due to domestic investors,” noted HSBC.

Rising housing prices limit the central bank for further rate cuts

Along with price rises, there has been a surge in credit channeling into the sector, prompting the SBV to called for commercial banks to enhance their risk management operations.


Statistics data suggests that credit growth in the real estate sector accelerated to 15% year-on-year in January and February, exceeding the SBV’s target of 12%.

“If the property market shows more signs of overheating, there is scope for the SBV to do more, such as introducing more restrictive macro-prudential measures or further tighten its quantitative [credit] quota. That being said, there is also a risk that the most recent wave of Covid-19 may complicate the process, given the adverse impact on Vietnam’s growth,” stated the HSBC. 

Over the years, the SBV seems to have used the monetary policy as a tool to support growth whereas it uses macro-prudential policies to manage property market risks, it added.

“Still, we expect rising housing prices to constrain the SBV’s ability to deliver any further rate cuts,” added the HSBC, while noting fiscal policy should be tasked with the burden of providing immediate targeted support amid the latest outbreak of Covid-19.

So far, the Ministry of Finance has proposed extending fee reductions for another six months until the end of 2021.

“ It is encouraging to see that the authorities are concerned that the housing market may run away from economic fundamentals, and are thus keeping an eye on the country’s real estate market. If needed, tighter macro-prudential policies could be used to further contain risks. That being said, this requires a delicate balance, given increasing downside risks to growth,” concluded the HSBC.  

TAG: Vietnam Covid-19 pandemic HSBC property risks credit growth
Other news
18:17, 2024/06/14
Vietnam to mobilize resources for social housing development
Promoting social housing projects remains a priority for the government.
18:00, 2024/06/10
Vietnam’s real estate market back on road to recovery
In early Q2/2024, Vietnam's real estate market is steadily recovered, with the launch of numerous projects in different segments and impressive sales.
14:55, 2024/05/28
Booming West Hanoi property driven by infrastructure investments
Hanoi's real estate market is expected to continue having positive developments in the upcoming quarters.
11:39, 2024/05/08
Hospitality real estate attracts remittances: VARS
Remittance volumes will be a new source of demand driving the property market, according to VARS.
13:31, 2024/04/30
Supply constraints keep housing prices high: expert
Rising value of Hanoi's residential segment calls for measures to reduce property prices.
15:16, 2024/04/15
Real estate prices are on the rise in downtown Hanoi
Demand for retail space in alleyways is rising as small and medium-sized enterprises seek to cut costs, given that most of their revenues come from e-commerce platforms.