Revision of Circular 36 Could Significantly Impact Vietnam’s Realty Credit Access: Savills

Tuan Minh

22:31 20/05/2016

BizLIVE - The revision of Circular 36 of the Vietnamese central bank could leave a strong impact on loans for the real estate sector, Savills has said in a report.

Revision of Circular 36 Could Significantly Impact Vietnam’s Realty Credit Access: Savills

The revision of Circular 36 of the Vietnamese central bank could leave a strong impact on loans for the real estate sector, according to Savills Vietnam. (Photo: Bao Dau Tu)

The draft revision of Circular 36, if applied, could significantly impact real estate credit access, Savills Vietnam has said in its latest report.
The State Bank of Vietnam (SBV), the country’s central bank, in February circulated a draft amendment of Circular 36, which sets several new rules aimed to strengthen risk management of lending activities.
According to the draft amendments, the percentage of short-term capital used for medium- and long-term lending to 40% from 60% presently. In addition, the risk weighting of real estate loans will be increased to 250% from 150%, which limits the banks’ credit growth in this sector.
“The curbs on real estate lending and focus on credit quality should help prevent new risks from building up in the banking sector. We support the SBV’s cautious approach,” HSBC researchers said in a report released early last month.
According to Savills Vietnam, the residential index in Ho Chi Minh City, Vietnam’s southern metropolis, rose one point quarter-on-quarter (q-o-q) and two points year-on-year (y-o-y) to 91.3 in the first quarter (Q1) of this year.
In the quarter, around 6,400 transactions were made, representing a decrease of 18% q-o-q, but an increase of 49% y-o-y. The overall absorption rate was 17%, down four points both q-o-q and y-o-y due to abundant new supply.
There were many factors contributing to high sales and price movement in Q1/2016, including seasonal, better construction progress, diversified product types, and flexible and prolonged payments offered by developers. Many developers have aggressive marketing campaigns, the report added.
The average occupancy rate of offices in the city hit 96% in Q1, the highest for the same period in the past eight years, Savills Vietnam has said in its latest report.
The office index in the quarter was 83.6, up two points quarter-on-quarter (q-o-q) and seven points year-on-year in the quarter, thanks to an increase in occupancy by one point q-o-q and a rise in rent by one point q-o-q.
In Q1/2016, total office take-up was approximately 26,400 square meters, decreasing 54% q-o-q but increasing 176% y-o-y.
With growing demand, Grade A and B office rent is expected to increase in coming years.
Meanwhile, the residential index in Hanoi was 107.5 in Q1/2016, down by less than one point q-o-q, but up 0.2 point y-o-y.
After high primary sales in 2H/2015, this quarter declined sharply to 5,600 sales or 13% q-o-q but unchanged y-o-y, according to the report.
In Q1/2016, Hanoi’s office index was 57.8 points, increasing 0.7 point q-o-q and 1.8 points y-o-y. The increased rent across all grades was the main reason for the upward index adjustment.

 

TUAN MINH

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