How much should the lending interest rate be adjusted for the real estate market to recover?

At the conference to assess the situation and remove difficulties for the real estate market on the afternoon of August 3, Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu said that in the first 6 months of the year, the SBV has continuously adjusted interest rates four times, with a reduction of 0.5-2.0%/year for all types. The average interest rate of commercial banks has also decreased by 1.5-2% depending on the type. Many banks have offered priority and preferential loans.

Loan interest rate needs to be below 10%/year

However, according to experts and businesses, the current reduction in lending interest rates is still not enough.

From a business perspective, Mr. Pham Duc Toan, General Director of EZ Real Estate Investment and Development Joint Stock Company (EZ Property), said that the current reduction in lending interest rates has only had a partial impact on psychology, and has not really become a lever to revive the real estate market.

“ The current reduction is only positive for units with existing debt, they borrow to restructure debt, but for new investors it is almost meaningless. Most investment groups in the market are still waiting for interest rates to cool down. During this period, many units will prioritize spending time completing legal documents, ” said Mr. Toan.

Only when the lending interest rate is below 10% will the real estate market have positive changes. (Illustration photo)

According to Mr. Pham Anh Khoi, a member of the Market Research Working Group of the Vietnam Real Estate Association (VARS), the interest rate chart is the deciding factor in whether or not cash flows will return to the real estate market. If this number remains high, it will be detrimental to the market.

" In the case that the lending interest rate only "stays around" 12-13%/year, the cash flow is likely to remain stagnant. Cash holders will temporarily hold the money to observe and wait, instead of moving the money into the market. When the lending interest rate returns to around 8-9%, then the real estate market will react positively. Because this is the threshold that investors can tolerate when borrowing ," said Mr. Khoi.

Sharing the same view, Mr. Le Tu Minh, Chairman of IMG Investment Joint Stock Company, also recommended lowering the medium-term interest rate to around 8.5% plus or minus as 2 years ago.

According to Mr. Minh, medium-term interest rates in Vietnam are still quite high, 5-6 months ago they were around 12-14%, businesses do not want to borrow, do not dare to borrow, and many customers put their money into other fields instead of choosing real estate.

Mr. Vu Cuong Quyet, General Director of Dat Xanh Mien Bac Real Estate and Services JSC, commented that input interest rates have decreased a lot, but output and lending interest rates have not decreased much. Home buyers are still paying interest rates of 11-12%, making it really difficult to increase real estate liquidity. Lending interest rates must be reduced below 10%, the market will have a clearer impact.

“ For real estate businesses, the problem of high interest rates will affect costs. Businesses with projects want to sell at reasonable and cheap prices, but input costs, especially interest costs, are still high, and costs such as construction materials and labor do not decrease, forcing the house price to be high. When the selling price is high, liquidity is not good, ” Mr. Quyet analyzed.

Therefore, according to Mr. Quyet, the interest rate for business loans must be reduced to 9-10% so that businesses can breathe easier. Then, there will be sources of goods pushed to the market at better prices.

As for home buyers, the desired interest rate they are willing to borrow is below 8%/year.

Specifically, a recent survey by Batdongsan.com.vn showed that when discussing expectations for home loan interest rates in 2023 - 2024, about 44% of respondents said that a home loan interest rate below 8% is reasonable for them to manage their finances and expect interest rates to drop to this level in 2024.

In addition, 33% of home buyers accept loans if the interest rate ranges from 8-10%, and only about 14% agree with the interest rate from 10-13%.

According to Mr. Le Bao Long, Strategy Director of Batdongsan.com.vn, the reason why many home buyers do not dare to boldly use financial leverage is because they are worried about economic difficulties, unstable jobs, and uncertain incomes, which put them under pressure and make them unable to afford the interest payments.

“ Most families with incomes under 40 million VND/month can only spend a maximum of 20 million VND or less to pay for buying real estate every month. The group with incomes over 40 million VND/month can only accept the cost of paying off fixed monthly home loans not exceeding 30 million VND. For the group of low-income customers, under 20 million VND/month, this number falls around 8 - 10 million VND at most ,” Mr. Long shared.

The Prime Minister directed the State Bank to review so that businesses and people can access credit capital.

Concluding the conference to assess the situation and remove difficulties for the real estate market on the evening of August 3, Prime Minister Pham Minh Chinh directed the State Bank of Vietnam to review credit lending to real estate enterprises and find appropriate and effective solutions for enterprises and home buyers to access credit capital. We must join hands to remove difficulties and obstacles so that the real estate market can develop stably, safely, healthily, effectively and sustainably.

Prime Minister Pham Minh Chinh delivered a concluding speech at the conference. (Photo: VGP/Nhat Bac).

The Prime Minister emphasized that it is necessary to restructure real estate segments appropriately, paying attention to the social housing, worker housing, and housing for middle-income people segments. To promote social housing, worker housing, and renovate old apartments, leaders of provinces and cities need to focus on this work, implementing it practically, effectively, and without formality.

" The State Bank continues to review credit lending to real estate businesses; has appropriate and effective solutions for businesses, real estate projects and home buyers to access credit capital more conveniently, both creating convenience and supporting businesses and controlling risks, contributing to removing difficulties, promoting the development of a safe, healthy, effective and sustainable real estate market, especially considering very specifically lending to projects that are about to be completed, " said the Prime Minister.

Ngoc Vy

Useful
Emotion
Creative
Unique
Wrath