Interest rate reduction still unlikely to have positive impact on real estate market?

Since mid-March, the State Bank of Vietnam (SBV) has lowered its operating interest rates three times in a row. Recently, right after the meeting between bank leaders and the SBV on the morning of May 25, commercial banks are expected to reduce lending interest rates by 0.3 - 0.5% for all old loans. These moves are expected to have a positive impact on the real estate market in the coming time.

Interest rate reduction still has a positive impact on the real estate market. — Continuously decreasing interest rates are expected to have a positive impact on the real estate market.

Economist, Dr. Dinh The Hien, said that if interest rates decrease due to banks having excess money, the real estate market will benefit. However, although the liquidity crunch has been resolved, the cooling of interest rates is not yet a sign of an economy with excess money. Therefore, money cannot immediately flow into investment channels such as stocks and real estate.

Dr. Dinh The Hien analyzed that after three years of continuous fever, real estate prices have now been pushed to too high a level. If the real estate market had stagnated or gone sideways since 2019, there would have been accumulation to continue growing. However, in the period of 2020 - 2021, real estate prices continued to increase in the context of economic recession.

“Now, those who have been holding land for investment and speculation can be said to have stopped. People just hope that the market will thaw, that there will be buyers and sellers to get rid of their goods, and they do not want to jump in to catch the bottom like in the period of 2012-2013,” the expert said.

According to Dr. Dinh The Hien, if the real estate market is to thaw, there must be some opportunities. The first is cash flow, the second is the price level dropping to a level that is enough for buyers to trust and accept.

In the context of the world economy recovering, stable exports and a more favorable domestic market economy... Mr. Hien believes that the real estate market scenario will thaw in 2024, focusing on urban residential areas and areas that can be invested in. At this time, the price level will decrease or remain stable.

Dr. Dinh The Hien also predicted that the possibility of idle money returning to the real estate market next year will not be high. "Many people holding land are currently having to bear the daily interest of bank loans. The market will not see new investors (who have not held land) pouring money into real estate like a previous wave. The number of people holding land wanting to sell their goods is greater than the number of people with money to hold goods, meaning demand is lower than supply," the expert analyzed.

Accordingly, investors will tend to invest in places where they see clear potential and can exploit it, instead of buying and selling en masse from urban areas to remote rural areas as before. At the same time, they also no longer believe in being able to "surf" like 5-7 years ago, so they will be more cautious in transactions.

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