Low interest rates, is Hai Duong real estate market "warmer"?

Stimulating lending

At BIDV Thanh Dong headquarters, at 3 p.m. on February 19, Mr. Le Van Hoan in Gia Loc town completed the application and waited for the disbursement of a loan of nearly 2 billion VND to buy a house in Hai Duong city. According to Mr. Hoan, he and his wife have been waiting for this loan since the end of last year. "After monitoring information about bank interest rates, we predicted that the loan interest rate would decrease at the beginning of this year, suitable for my wife and I's ability to pay from our income," said Mr. Hoan.

Mr. Hoan's loan is one of 8 loans that BIDV Thanh Dong has disbursed from January 30, 2024 to present, with a total outstanding balance of more than 12 billion VND. This is the time when this bank is implementing a preferential medium and long-term credit package to serve the needs of building and buying houses for individual customers, with a minimum interest rate of 6%/year fixed for 2 years from the date of first disbursement.

Mr. Truong Trung Hieu, Head of BIDV Thanh Dong Personal Customer Department said: “Compared to the preferential credit package we previously implemented, the current package has an interest rate 0.5% lower per year. This is the lowest lending interest rate in many years. On the customer side, we believe that banks reducing lending interest rates for real estate purchases at this time will meet the real housing needs of the people. For our bank, this is also a boost to credit growth, further facilitating capital flows to the market.”

Sharing the same view, Ms. Nguyen Thi Quynh Diep, Head of Personal Customer Department of Agribank Hai Duong province, said that reducing lending interest rates is a specific solution from the efforts to accompany customers that the banking industry has implemented over the past time. Agribank is also implementing a preferential medium and long-term credit package with a scale of 10,000 billion VND from February 1, including serving people's real estate purchasing needs, with interest rates up to 2.5% lower per year than normal loans. From the beginning of February to February 19, Agribank Hai Duong province has completed disbursing more than 10 billion VND.

Since the end of 2023, banks in the province have simultaneously reduced deposit interest rates, creating conditions for reducing lending interest rates, contributing to stimulating people's demand for loans to buy real estate. According to the latest report from the State Bank of Vietnam's provincial branch, by the end of December 2023, outstanding loans for real estate business activities in the whole province were over VND 7,900 billion, accounting for 5.9% of total outstanding loans.

"Heating up" the real estate market?

However, the above-mentioned data on outstanding debt of real estate business activities has decreased by 0.4% (nearly 300 billion VND) compared to the end of November 2023. Explaining this, Mr. Bui Minh Phong, Chairman of the Board of Directors, Director of THP Real Estate Joint Stock Company in Hai Duong City (THP real estate trading floor) said that low interest rates on bank loans will create conditions for people with real housing needs.

On the contrary, for investors, the current real estate market is not as attractive as expected, so the demand for bank loans for investment is not high. “Although the real estate price level in the province has decreased by about 30%, even up to 40% in some places compared to the peak in mid-2022, this price level is not enough to satisfy investors. The difference between buying and selling is not enough to cover the costs. Therefore, whether they own or are waiting to buy real estate, investors are trying to "hold on" for a while to listen to market signals. Many people believe that from now until the end of the year, real estate prices will go down, at most they will go sideways,” Mr. Phong shared.

In fact, it is necessary to recognize that the reduced lending interest rates at banks are only for individual customers, that is, for people buying houses to live in, or for investment needs, there are not many preferential credit packages for real estate businesses. Moreover, the real estate segment for people to buy to build houses is usually in the price range of 2.7 billion VND or less.

There was a time when out of 10 real estate transactions, 8 were investment transactions and 2 were residential purchases. In addition, the value of these transactions was not only in the small retail segment but also in high-end real estate. “The market is also bustling because of that. Now there are almost no investment transactions, and transactions of people buying for residential purposes are only in the mid-range segment and below, but there are not many properties in this price range. Therefore, the general market cannot warm up again for at least another 9 months,” said a representative of a real estate business in the province.

Sharing the same view, Mr. Nguyen Huu Khuyen, Director of Newland Investment Joint Stock Company, Hai Duong branch, said that under the impact of the interest rate reduction, the "panorama" of the real estate market will have many new bright spots. "However, at this time, cash flow will only focus on a number of potential segments. These are real estates with legal security, investor reputation, located in areas with room for development, with synchronous planning, and low price levels. In other words, these are real estates with high potential for price increase," said Mr. Khuyen.

In the context of many investors and banks increasing cooperation to implement preferential credit packages, reasonable lending interest rates are expected to create certain conditions to promote the Hai Duong real estate market, although the market recovery will not be uniform in each segment.