Hoang Nam recently bought a VND2.4 billion ($103,814) apartment in HCMC’s District 9, borrowing 60 percent of the amount from a bank. He said he was motivated to buy by lower loan interest rates.

Most commercial banks have cut their interest rates for residential property loans by 1-2 percentage points since the beginning of the year to 7-11.5 percent a year as they seek to boost credit growth amid the Covid-19 pandemic.

A recent report submitted to the parliament by the State Bank of Vietnam (SBV), real estate credit of VND1,600 trillion accounts for over 19 percent of the total. Of this, more than 62 percent has been taken by housing loans.

In HCMC, real estate loans increased by 7.2 percent in the first ten months to over VND300 trillion, compared to overall credit growth of 5.5 percent during the same period.

Nguyen Khac Quoc Bao, head of the Fintech Institute at the University of Economics Ho Chi Minh City, said that the flow of credit into real estate was happening as investment in manufacturing and services reduces amid Covid-19 difficulties.

The rising prices of real estate in the last decades combined with Vietnamese people’s high regard for real estate investment also explains why housing real estate account for a majority of the loans, he added.

However, some experts said this also raises the risk of increasing bad debt as had happened in the wake of the 2008-2009 economic crisis.

Economist Nguyen Tri Hieu said although Vietnam has been able to contain the Covid-19 outbreaks, commercial banks still need to show prudence in lending to prevent a rise in bad debt.

The central bank has been making some moves to reduce risks in real estate lending. One circular which took effect earlier this year increases the risk factor for real estate loans, forcing banks to be more selective in issuing them.

However, several industry insiders have said that bonds issued by real estate firms could also see bad debts surge.

Deputy Director of lender Sacombank Phan Dinh Tue said although bond was a form of credit, some banks might not include it in their real estate credit reports, making it difficult for officials to track the correct real estate lending figure.