Real Estate Market: Impact of Credit Squeeze

4 Jul
VNRETightening credit is a direct way to cool down the real estate market. On the bright side, housing and land prices – which are unbearably high for most Vietnamese people – are on the fall on a wide scale. However, this development is causing certain impacts on some real estate-related sectors.

Credit squeeze has driven many real estate companies to hardship. Under this circumstance, according to many economic specialists, we need to determine what is in need of tightening and what is in need of loosening to create best conditions for the market.

The first to be hurt by tightened credit policy on real estate market is construction material market. Many property projects have to be suspended or slowed down on the back of slow sales, leading to a sharp slump in construction material demand.

Although the construction material market is a manufacturing sector and it is given priority for development, it largely depends greatly on the development of property market. Meanwhile, real estate is considered a non-manufacturing sector – a target of credit squeeze policy.

According to many economists, current approaches are not completely reasonable. Dr Vu Dinh Anh, Director of the Research Institute for Market Price Sciences, said: “Currently, we are putting all real estate fields into non-manufacturing sectors but in practice not all of them are non-productive because many important fields of the real estate industry belong to manufacturing sectors.”

Remarking on this matter, Deputy Construction Minister Nguyen Tran Nam said: “”The delimitation of manufacturing and nonmanufacturing sectors must be very flexible and based on nature. For real estate industry, we must select high practicable and high-liquid projects like affordable housing. We should continue lending this type of public-attracting projects. To limit impacts of credit squeeze on manufacturing sectors, the State Bank of Vietnam (SBV) said it will coordinate with the Ministry of Construction to introduce criteria for the real estate sector.

This is considered a positive measure to support some fields of construction material production. SBV Governor Nguyen Van Giau said: “The State Bank will coordinate with the Ministry of Construction to have a new approach to the property market and apply solutions to existing problems. Only by this way, we can have most appropriate criteria to resolve problems in a manner that suits conditions in Vietnam and satisfies international practices.”

This is seen good news for businesses operating in real estate and construction material fields. With a clearer definition for manufacturing fields in real estate sector, companies hope to revitalise production in this tough time.

Reported by Luong Tuan | VCCI News

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