Interest rates drop sharply, why is the real estate market still sluggish?

Interest rates decrease, people still do not dare to borrow

In September 2023, home loan interest rates of many banks have dropped below 10%. Typically, in the Big 4 group, BIDV bank has an attractive interest rate of only 7.8%/year, Vietcombank and Agribank have an interest rate of only 8%/year, Vietinbank is 8.2%/year.

Private commercial banks also have sharply reduced interest rates to “inject capital” to home buyers. MBBank has a lending interest rate of only 7.5%/year; HDBank is 8.2%/year; Techcombank, Eximbank, ACB , TPBank, MSB all have interest rates of 8.5%/year.

However, the interest rate below 10%/year of banks is only applicable in the first year, or even only applicable for 3-6 months, the floating interest rate will then fluctuate from 10.5-12%/year for the Big 4 group. The group of private commercial banks will fluctuate from 12-15%/year.

Interest rates at many banks have dropped sharply in recent times. (Photo: D.V)

Although bank interest rates have dropped sharply, even to levels equal to or lower than before the COVID-19 pandemic, people and real estate investors are still not very interested.

Ms. Tran Truc Nhu Thuy (living in Tan Binh District, Ho Chi Minh City) said that her family is planning to buy a new house on Hoa Hao Street, District 10 for 6 billion VND. She needs to borrow about 2.5 billion VND from the bank. However, the loan is being carefully considered because both her and her husband's income has decreased.

“ With the current interest rate, if we borrow 2.5 billion VND, my husband and I will have to pay about 33 million VND in principal and interest each month. This is quite a heavy burden at this time because our total monthly income is only about 50 million VND. If we borrow from the bank to buy a new house, we will have no money left to take care of our children,” said Ms. Thuy.

According to Ms. Thuy, since the end of 2022, the couple's total income has decreased by about 20%. This makes her less interested in borrowing from banks.

Not only Ms. Thuy, many people and investors in Ho Chi Minh City are not interested in borrowing money to buy real estate at this stage even though bank interest rates have become more "affordable". They believe that the decrease in income is the important factor that makes them not dare to borrow money at the present time.

Representatives of many real estate businesses in Ho Chi Minh City shared that the sales revenue of businesses is still "poor", liquidity continues to be quiet. The number of apartment and townhouse transactions is still the lowest in the past 5 years. The psychology of investors and people is still very "cautious".

Banks have "excess money" but businesses have difficulty accessing it

Mr. Pham Lam, General Director of DKRA Vietnam, said that for people who want to buy a house to live in, this is a favorable time because banks are offering extremely attractive interest rates. From the perspective of businesses, he found that access to loans is still difficult.

According to Mr. Lam, although banks have become more "comfortable" in lending, real estate businesses still have difficulty accessing capital due to many shortcomings in completing legal procedures for projects.

“ The borrowing of capital to implement projects always encounters legal bottlenecks. If the legal procedures are not completed, businesses cannot access loans. This is also a common story of the entire real estate market. That is also the reason why banks have excess money, real estate businesses are thirsty for capital, but the two sides still cannot find each other, ” said Mr. Lam.

According to Mr. Lam, banks, businesses and relevant agencies are trying to find a common voice in resolving the remaining problems. He hopes that more positive signals will come to the real estate market in the near future.

Access to capital for real estate businesses remains very difficult. (Photo: D.V)

Responding to VTC News, a senior leader of BIDV Bank said that the economy is facing many difficulties, leading to people's business, trade, and commerce also "going down". This causes real estate transactions and sales to also decrease, despite low interest rates.

“ The volume of real estate transactions in the market has decreased sharply, so customers will not have much demand for loans. High or low bank interest rates are only a very small factor. The important thing is that if people do not buy, sell or trade, banks cannot lend, ” said the leader.

According to a representative of BIDV, the bank is eager to lend money to people and businesses because the bank itself has “excess money”. However, if people do not buy, sell, or transact, it will be very difficult to “pump money” into the market.

According to Mr. Nguyen Van Dinh, Chairman of the Vietnam Association of Realtors (VARS), banks and real estate businesses have not yet found each other, even though banks have "excess money" and businesses need money.

Mr. Dinh commented that recently, the State Bank has made efforts to adjust and support businesses through many interest rate reductions and preferential credit packages... However, businesses and banks still have "difficulty meeting" because real estate businesses do not meet the loan conditions because their "health" has weakened.

Specifically, a group of businesses that are eligible to access capital and have the capacity to absorb capital are facing legal problems. Meanwhile, a group of businesses that are ready to access capital are having difficulty absorbing it because interest rates are still high compared to the businesses' tolerance.

In addition, a group of businesses are not yet qualified to pass the appraisal round to access capital due to many previous debts, which pose a risk to the bank.

According to VARS representative, in order for real estate businesses to absorb new capital sources, market problems must be thoroughly resolved.

In addition to familiar financial sources such as bank credit and corporate bonds, there needs to be mechanisms and policies to develop, attract and ensure effective operation of capital sources from other financial products (real estate investment funds - REIT, Housing Savings Fund, real estate securitization...) or other channels (direct and indirect foreign investment).

At the same time, the authorities also need to have policies to protect legitimate real estate businesses. Capital needs to be released to all sectors in the economy, including real estate.

Deputy Governor of the State Bank Dao Minh Tu said that the entire banking system is having to "treat the disease of excess money".

According to the latest statistics of the State Bank, people's savings deposits by the end of June 2023 reached 6.38 million billion VND, an increase of 8.82% compared to the end of 2022. Thus, people's deposits have increased continuously since October 2022.

Compared to May, people's deposits in the banking system increased by VND 35,341 billion. Compared to the end of 2022, the amount of savings deposits in banks increased by more than VND 429,000 billion.

However, in contrast to the continuously increasing flow of money people deposit into banks, the flow of money loans from banks is slow, causing credit growth to be the lowest in the past 10 years.

By the end of August 2023, economic credit reached about 12.56 million billion VND, up 5.33% compared to the end of 2022, while the same period last year increased by 9.87%.

Lending interest rates tend to decrease. Currently, the liquidity of the credit institution system is abundant and there is still a lot of room for credit growth. Specifically, the whole system has about 9% left for credit growth, equivalent to 1 million billion VND.

DAI VIET

Source: https://vtc.vn/lai-suat-giam-sau-vi-sao-thi-truong-bat-dong-san-van-i-ach-ar819380.html