Banks’ Credit Freeze Sparks Market Turmoil, Interest Rates Surge to 19-20%
The real estate market in Vietnam has been thrown into disarray as several banks have paused or restricted lending, triggering sharp rises in interest rates. According to Lê Hoàng Châu, president of HoREA, the real estate sector’s key lenders have imposed rates as high as 19-20% annually, straining businesses and creating uncertainty. This tightening has disrupted construction projects and stalled sales, with experts warning that the sector’s 12% contribution to GDP could face broader economic fallout if left unchecked.
The crisis has deepened as banks adopt overly cautious stances, effectively closing credit lines to certain segments despite genuine demand. Châu emphasized that such rigid policies risk stifling growth, noting that real estate underpins over 40 industries. He argued that indiscriminate credit cuts could freeze markets for years, echoing past cycles where recovery proved prolonged.
Meanwhile, the situation has intensified in Đồng Nai province, where developers face mounting pressure to secure financing amid rising costs. Local officials and industry leaders have called for targeted interventions to prevent a deeper slump, highlighting the sector’s role as a critical infrastructure component.
Experts Warn Against Over-Regulation, Advocate Targeted Credit Allocation
Economists like Lê Xuân Nghĩa have stressed that real estate should not be viewed as a speculative asset but as a cornerstone of the economy. With a market value of 1.4 trillion USD and a credit footprint of 500 billion USD, the sector’s significance is underscored by its role in global financial systems. Nghĩa cited European and American data showing that home loans dominate consumer credit, yet Vietnam’s policies have failed to reflect this, leading to distorted lending practices.
Trần Việt Anh, CEO of SCC, echoed these concerns, pointing out that industrial real estate—linked to manufacturing and investment—remains lumped with residential projects. He argued that this lack of differentiation undermines growth, as seen in countries like South Korea and China, where industrial zones receive preferential financing. Anh proposed a shift from blanket credit controls to sector-specific policies, prioritizing projects that align with economic development goals.
The call for reform has also gained traction among policymakers. Ngân hàng Nhà nước officials acknowledged the need to balance risk mitigation with market stability, emphasizing that credit should be allocated based on project viability rather than uniform restrictions. However, the challenge lies in reconciling regulatory caution with the sector’s vital role in national growth.
Calls for Sector-Specific Credit Policies to Stimulate Growth and Stability
Industry leaders and economists are pushing for a paradigm shift in credit management, urging regulators to adopt differentiated approaches. They argue that instead of applying uniform restrictions, banks should focus on project-specific assessments to ensure capital flows to viable ventures. This would align with global practices, where real estate is integrated into broader financial systems rather than isolated as a speculative asset.
The proposed reforms include allocating annual credit limits and developing long-term loan packages tailored to investment cycles. Experts also stress the need for banks to collaborate with the government to reduce interest rates, citing the sector’s historical resilience despite economic downturns. For instance, during the pandemic, the banking industry still generated 7 billion USD in profits, underscoring its capacity to support recovery without excessive risk.
Ultimately, the debate centers on redefining real estate’s role in Vietnam’s economy. To avoid a prolonged downturn, policymakers must prioritize flexibility, transparency, and targeted support. This shift, experts agree, is essential to ensure the sector remains a sustainable driver of growth rather than a casualty of overly rigid financial controls.
Conclusion
The crisis in Vietnam’s real estate sector underscores the urgent need for balanced, sector-specific credit policies. As experts and regulators debate the path forward, the challenge lies in reconciling risk management with economic growth. Without reforms that prioritize productive investment over blanket restrictions, the sector’s potential to contribute to national development remains at risk.
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