Real estate prepares for capital tightening scenario in 2018

The State Bank is gradually restricting capital flow into real estate.

In a recent document recommending real estate businesses in their investment and business activities in 2018, the Ho Chi Minh City Real Estate Association said that the real estate market in 2018 will also face many challenges and difficulties.

One of them is the difficulty in accessing bank loans because the State Bank is implementing a roadmap to gradually limit credit sources to the real estate market.

Resolution 01 of the Government also requires the banking sector to strictly control credit for potentially risky sectors, including real estate.

The Government also requested that authorities study solutions to promote stable and sustainable development of the real estate market, preventing speculation and unreasonable price increases.

In addition, after a period of loosening the ratio of short-term capital use for medium and long-term loans to 60%, the State Bank has gradually lowered the ratio of short-term capital use for medium and long-term loans to 50% now and will decrease to 40% from 2019.

The State Bank also stipulates the risk coefficient when lending for real estate is 200% from January 1, 2017.

Recently, the State Bank has issued Official Dispatch 563 requesting banks to limit the level of credit concentration in the real estate and construction sectors.

Control well the quality of consumer credit; improve the efficiency of application review, especially loan conditions to limit risks.

Banks must also closely monitor the use of consumer loans that are actually used for real estate investment and business.

According to the Ho Chi Minh City Real Estate Association, this pressure will also be the driving force forcing real estate businesses to seek suitable solutions to overcome and adapt to the completely new business environment.

At the same time, the Association recommends that businesses increase equity to strengthen their internal strength.

The deputy general director of a large bank said that recently a large amount of money from foreign investors and residents has poured into the stock market, helping the stock market to grow.

The State Bank also supplies a certain amount of money to the market to buy foreign currency from foreign investors pouring in to buy shares of state-owned enterprises.

Once money goes into stocks, companies will use the money to invest in other channels, most of which is real estate, pushing housing prices up continuously.

Another source of money flowing into real estate is from loans to buy, build, and repair houses. In addition, the consumer channel is being pushed very strongly.

"When consumption is high but people's cash flow cannot meet it and they have to rely on banks, it will lead to many risks, especially debts that cannot be paid. This will not only greatly affect banks but also the economy. The State Bank is worried that the market will repeat the previous situation, so it has warned. Although this tightening affects the bank's profits in the short term, it will be good for the future," said the deputy general director.

Previously, the National Financial Supervisory Commission also warned that there was a situation where banks were "dodging" real estate loans when 53% of consumer loans were for home repair and home purchase loans.