Customers at TPBank

Despite currently low home loan interest rates, many people are still apprehensive about asking for a loan. According to resident Hung Minh, who lives in Thu Duc City, even with savings and a monthly salary of roughly VND30 million (US$1,200) for both the husband and wife, it is still insufficient to purchase a home. Right now, his family is paying VND9 million for the rental of an apartment close to Rach Chiec Bridge.

He revealed that if they buy an apartment worth nearly VND3 billion, they will have to borrow about VND1.5 billion. Although the bank is currently lending at 6 percent a year for the first year, the floating interest rate plus a margin of 3.5 percent-4.5 percent yearly will increase to 9 percent-11 percent per annum.

If the loan is for 15 years, each month the couple will have to pay VND16 million-VND18 million a month including principal and interest, while also having to spend on living expenses and raising children, so they still have to consider and plan more carefully, Mr. Minh shared.

According to real estate market research organizations, the demand for buying houses is very high, but with the current high price, many people with good income still do not dare to buy a house.

In the first six months or year, a large number of commercial banks (CBs) drastically lowered the interest rates on home loans to 5 percent–6.5 percent annually. Disappointingly, not many consumers have taken out home loans.

Explaining for this, Acting General Director of ABBank Pham Duy Hieu stated that during the first half of the year, the capital demand of businesses increased more quickly than that of individual customers.

The cause is that companies have reduced staff as a result of the challenging economic climate, which has affected workers' financial circumstances and reduced demand for loans overall and for home loans in particular. Furthermore, there is a shortage of cheap apartments and a weak real estate market, which means that demand for home loans has not increased once more.

According to a Vietcombank representative, retail credit balances, the majority of which were home loans, previously made up close to 20 percent of the bank's total amount of outstanding loans. However, there has also been a decline in retail bank credit as a result of the decline in home loans during the first few months of the year.

Financial and banking expert Nguyen Tri Hieu said that people are still not interested in buying houses at this time even though interest rates are considered the lowest ever, partly because house prices are still high.

Along with that, although interest rates have decreased, it is only at the beginning. The rate of using leverage to buy a house is often up to 70 percent - 80 percent of the house value. High house prices and high leverage create a financial burden for home buyers. Besides, investing in real estate at this time also gives a low rate of return.

Expert Hieu noted that previously, purchasing an apartment for approximately VND3 billion could yield rental income of VND10 million-VND12 million per month. However, at the same price point today, investors are now looking at an investment requirement of around VND4.5 billion-VND5 billion.

A recent analysis by VPBank Securities Company (VPBankS) highlighted that while home loan interest rates have shown a favorable decline over the past year, there has not been a significant improvement in real estate credit due to persistently high property prices. VPBankS emphasized that sustainable credit growth must be driven by the capital needs of the populace and, crucially, by the real estate sector. This sector is recognized for its substantial and stable capital requirements, along with collateral that mitigates the risks associated with bad debts.

Therefore, it is expected that policies and mechanisms to regulate real estate prices to suit people's income levels and strong disbursement of social housing credit packages will support more sustainable credit growth.

Commenting on the Vietnamese real estate market in the Vietnam economic update report released at the end of August 2024, the World Bank said that Vietnamese authorities are making efforts to support the real estate sector to recover, including putting laws into effect early.