Property market faces serious liquidity issues: conference

June, 08/2022 - 07:42
With the real estate market facing liquidity problems, analysts have called for the Government and banking industry to create a mechanism that enables property developers to borrow and issue bonds.

 

Lê Hoàng Châu (standing), chairman of the HCM City Real Estate Association, speaks at a conference on funding the property sector in HCM City. VNA/VNS Photo

HCM CITY — With the real estate market facing liquidity problems, analysts have called for the Government and banking industry to create a mechanism that enables property developers to borrow and issue bonds.

Speaking at a seminar on capital sources for the real estate market yesterday, Lê Hoàng Châu, chairman of the HCM City Real Estate Association Minh, said, “The market is facing serious liquidity problems.”

Businesses’ own funds account for only 15-20 per cent while the remaining 80-85 per cent come from bank loans, bond issuance, home buyers, and foreign investment, he said.

“Bank credit is one of the most important capital mobilisation channels for real estate businesses and a lack of loan will greatly affect them.

“With the current restrictions on lending, developers have to switch to issuance of corporate bonds.” 

He suggested amending a decree on bond issuance to make it a healthy channel for the market.

Dr Đinh Trọng Thịnh of the Academy of Finance said the tightening of corporate bond issuance should be done with a road map, slowly and step by step.

“If the brakes are applied too suddenly, it would cause shocks to the market and risks to the overall economy.”

Lê Thành, chairman of the Green Economy Institute, said the property market contributed 14 per cent to the country’s GDP in 2019-21 and had a spillover effect on some 40 other sectors such as construction, processing, tourism, accommodation and catering, and finance and banking.

In April the central bank started tightening credit for the real estate sector, he said.

“The tightening of bond issuance and real estate credit has caused difficulties for the market.”

According to the Ministry of Construction, as of the first quarter of this year there were only 24 completed real estate projects, or half the number in the previous quarter and a year earlier.

The number of projects eligible for sale was only 56, down by two thirds from the previous quarter, and the low supply pushed prices up dramatically, he said.

Đào Minh Tú, deputy governor of the State Bank of Việt Nam, said the focus was on controlling credit risk to ensure market transparency and preventing a bubble.

But lenders would only tighten credit to high-risk segments to prevent speculation, but not to segments like housing for workers and the poor, he assured.

Lê Xuân Sang, deputy director of the Việt Nam Institute of Economics, said it was vital to improve existing channels while promoting new channels such as real estate investment trusts (REIT).

Ngô Trí Long, former director of the Ministry of Finance’s Price and Market Research Institute, said the central bank and credit institutions must ensure stable overall credit growth and the quality of lending to the real estate sector.

Lending to the property sector accounts for nearly 20 per cent of total outstanding credit, according to the central bank. 

At the end of April total outstanding loans to the sector was VNĐ2.3 quadrillion, up 10.19 per cent from the end of 2021, accounting for 20.44 per cent of total outstanding loans. — VNS