HCMC – The rise in non-performing loans within the real estate sector has become a cause for alarm as the bad debt ratio escalated from 1.53% in the previous year to 2.47% during the first half of 2023.
The State Bank of Vietnam (SBV) addressed this issue during a conference on capital access and utilization in the business sector held on August 22, highlighting the significant growth in non-performing loans within the real estate sector, especially in comparison to the figures at the end of 2022.
While real estate credit accounts for around 20% of the overall credit landscape, its growth rate is currently trailing behind the broader credit expansion, said Ha Thu Giang, head of SBV’s Credit Department for the Economic Sector.
In the first half of 2023, outstanding balances of real estate loans increased by 17.41%, surpassing the 10.73% growth rate observed throughout 2022. However, real estate consumer loans, constituting 65% of total real estate credit, experienced a decline of 1.12%. This marks the first drop in this category in three years, starkly contrasting with the 31% growth rate seen in late 2022.
This emerging trend highlights a shift in credit resources toward the supply side of the market. Conversely, the demand for credit for home acquisition is diminishing, indicating that the measures undertaken to alleviate market challenges are beginning to yield results.
Legal obstacles that previously hindered real estate projects are being gradually resolved, contributing to improved credit accessibility for project investors.
However, within the broader context of shared challenges, the current environment does not prioritize the demand for housing purchases. The market grapples with an imbalance in product structuring – an oversupply of high-end properties coupled with a shortage of affordable housing suitable for citizens’ needs. Additionally, legal barriers obstruct real estate projects from meeting credit conditions, thus limiting access to capital.
Given its substantial share within the economic credit structure, the decline in real estate loans is linked to sluggish credit growth. Data from the SBV underscores low investment and consumption demand as factors influencing the overall low credit demand.
The total credit scale across economic sectors as of late July had increased by 4.56% to VND12,470 trillion compared to the late 2022 figures. However, credit expansion for the first seven months of this year significantly fell short of the same period in 2022, which stood at 9.54%.
Recent credit growth rates for the economy were recorded at 3.03% in April, 3.27% in May, and 4.73% in June. It is evident that credit growth decelerated and even turned negative in July, following a positive recovery surge in June.