Proposal to 'tighten' real estate credit: Capital flow is blocked, market is 'frozen'

TPO - Experts say that the policy of making the market healthy and stabilizing real estate prices is correct, but if credit is "tightened" as proposed by the Ministry of Construction, it needs to be carefully considered, because arbitrary proposals for the real estate market and jerky management will cause chaos and panic in the market, with huge consequences. Meanwhile, the correct solution must be to increase supply and reduce input costs.

Báo Tiền Phong•09/10/2025

Cautious "tightening" of credit

The draft resolution of the Government on controlling and curbing real estate prices has just been sent by the Ministry of Construction to 5 ministries and branches for comments before submitting it to the Government for promulgation.

Accordingly, the second home buyer can only borrow up to 50% of the home purchase contract value. In the case of buying a third home or more, the loan limit will be no more than 30% of the home purchase contract value, applicable from the effective date of the resolution until March 1, 2027.

Experts say that the policy of fighting speculation and stabilizing housing prices to make the real estate market healthy is correct. However, the credit tightening measure proposed by the Ministry of Construction is a non-market approach, going against modern economic principles.

Dr. Truong Van Phuoc - former Acting Chairman of the National Financial Supervision Committee, former standing member of the Prime Minister 's Economic Advisory Group - said: "The policy is correct but the solution is not reasonable. Prohibiting or restricting the lending rights of banks is an administrative approach, contrary to the principles of the market economy - something that Vietnam has strived for many years to gain international recognition."

Non-market interventions will have serious consequences.

Sharing the same view, Dr. Dinh The Hien - Director of the Institute of Informatics and Applied Economics - frankly pointed out that no country in the world has intervened so brutally in the operations of commercial banks and the real estate sector. According to Mr. Hien, lending is a civil relationship between banks, investors and customers; this transaction is regulated by the Law on Credit Institutions. Using administrative orders to intervene is not only illegal, but also distorts the capital market.

“Commercial banks must be free to assess risks and decide on lending, instead of being forced to limit lending by administrative orders. If real estate lending is banned, people can still borrow for consumption to buy houses, which is difficult to control, increases social costs and can easily lead to distortions,” Mr. Hien said.

Mr. Hien said that a family can buy many houses for their children, which cannot be equated with speculation. Similarly, buying houses for rent, buying shophouses for business or simply accumulating assets... are also legitimate needs of the people. Limiting the loan amount to only 30-50% is too low and lacks economic basis.

Carefully consider the proposal given the current market situation.

According to experts, the Ministry of Construction needs to consider carefully to avoid making arbitrary proposals like the current one. Choppy management will cause market disorder and panic, erode confidence and damage the investment environment.

“Today there is this policy, tomorrow there is another policy, what will the investment environment be like?”, expert Dinh The Hien asked, expressing concern that if approved, the loan tightening policy will make the supply shortage situation worse. The uncertainty of the policy can make businesses lose confidence, temporarily stop investing, or even leave the market. As a result, the supply will be further narrowed. In addition, businesses can wait until after the loan tightening regulation expires (March 1, 2027) to bring products to the market to “avoid the storm”. Two years of waiting means capital costs increase, and in the end, they will still be poured into the selling price, causing house prices to escalate even more.

From a policy perspective, Dr. Truong Van Phuoc believes that the State can and should intervene, but it must be in the right place and in the right role. Specifically, the State must remove legal obstacles so that businesses can implement projects faster, adding supply to the market.

In particular, the State can adopt specific policies to reduce input costs for businesses, instead of tightening capital output. One of the decisive factors is land use fees, which currently account for a very large proportion of housing prices.

“Land is owned by the entire people, with the State representing the owner and managing it uniformly. The State can absolutely regulate lower land use fees to reduce costs for businesses. When input costs decrease, housing prices will automatically decrease. That is the only reasonable way to intervene in the market,” Mr. Phuoc emphasized.

From a macro perspective, Dr. Le Xuan Nghia - a member of the National Financial and Monetary Policy Advisory Council - is concerned that tightening real estate credit is no different than "taking the breathing tube" out of one of the main growth engines of the economy. Real estate currently contributes about 10% of GDP, dragging along more than 40 other sectors, from construction materials, interior design to banking... The lesson of 2022 remains the same: If capital flows are blocked, the market "freezes", businesses will struggle, a series of other industries will collapse, millions of people will lose their jobs, threatening growth.

Mr. Nghia cited that the global real estate market capitalization is up to 360,000 billion USD, 3 times the world GDP - about 120,000 USD, showing the importance of this sector to every economy. In Vietnam, the real estate market capitalization is about 1,500 billion USD, 3 times the GDP.

“There is no sector as large and as far-reaching as real estate. If we tighten it now by administrative orders, it will not only not reduce housing prices but also cause economic stagnation. China with its three red lines policy has proven that,” Mr. Nghia warned.

According to the expert, the main culprit for the escalating housing prices is not speculation but the stifled supply, stemming from the legal deadlock over the past many years. Currently, project approval procedures are too cumbersome, taking 5-7 years, even a decade to be implemented. Meanwhile, the demand for housing is constantly increasing.

“Thousands of projects are shelved, causing financial costs to rise, forcing businesses to sell at high prices to compensate. If legal bottlenecks are removed and supply is abundant, the market will self-regulate according to the law of supply and demand. On the contrary, using the wrong medicine to treat a disease will make the disease worse,” Mr. Nghia analyzed.