Government allays property bubble fears

Saturday, Jul 18, 2015 14:04

Villas in the Vinhomes Riverside Complex in Ha Noi. -- Vinhomes Photo
HA NOI (Biz Hub)— The pick-up of the property market has triggered bubble fears, but State management agencies said the market would be closely watched to prevent it from happening again.

Construction Minister Trinh Dinh Dung recently said the market recovery, reflected in the rising number of successful transactions and soaring prices, was not the result of speculation.

The ministry's report said there were about 14,000 transactions in the first half of this year, more than double the figure of the same period last year.

He said the recovery was thanks to the Government's measures for tackling problems in the property market, together with the housing development strategy implemented in the years after the market crash in 2008.

However, he said speculation would be unavoidable during the recovery period, and that "it is important to tighten management to prevent overheated growth that would create a property bubble".

Preventing speculation required the joint efforts of relevant ministries and organisations, especially the banking sector's tight control over the credit flow into the property market.

Controlling credit

Looking back at the 2006-07 period, when easier credit was one of the factors that fuelled the property bubble, resulting in huge non-performing debts in the real estate sector when the bubble burst, experts said banks should tighten control over outstanding loan growth in this sector.

Tran Du Lich, a member of the National Monetary and Financial Policy Advisory Council, said the rising capital flow into the property market was a good sign. However, banks must control the growth of outstanding loans in the real estate sector to avoid risks, he said.

Banks should select good projects to provide loans, he said.

The property sector has received increasing capital flows from banks, foreign direct investment (FDI) and overseas remittances from the beginning of this year.

Statistics of the State Bank of Viet Nam showed that as of the end of May, credit growth in the property sector was 10.89 per cent, nearly double the overall credit growth of the economy.

According to the Foreign Investment Agency under the Ministry of Planning and Investment, the property sector ranked second in attracting FDI in the first half of the year with a total of more than US$465 million, accounting for 8.5 per cent of the country's FDI.

The capital flow into the property sector was expected to rise as the central bank recently agreed to increase the credit growth targets for several commercial banks. However, tight supervision of loans given to sectors with high risks such as the real estate sector was required.

Nguyen Van Duc, deputy director of Dat Lanh Real Estate Company, said it was important that the right money went to the right places.

The central bank at its press conference last month said the loans were mainly channelled into construction and completion of works, adding that it would continue to monitor credit flow into the real estate sector.

At the Government meeting in April, the Prime Minister said active measures should be taken to ensure healthy and sustainable development of the property market, together with preventing the return of a market bubble. — VNS

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