Lending rate cuts not enough to warm up realty market

Aug 15th at 13:03

15-08-2012 13:03:20+07:00

Lending rate downtrend offers homebuyers more chances to access financial assistance from banks, but experts deem it not enough to prop up the property market and lure buyers for investment purposes.

Unlike the first two quarters, the third quarter so far has seen many apartment projects, mostly the mid-end ones, launched into the market.
Apart from flexible payment methods, project owners also join hands with banks to provide homebuyers with preferential lending rates of around 12% per year.

For example, Nam Long Investment Corp. last week put up for sale 2,000 Ehome 3 Saigon West condos in HCM City’s Binh Tan District at 615 million dong each. Among the banks that give out loans to customers of this project, Vietcombank offers an annual lending rate of 12%.

In another example, the HCM City-based Construction and Investment 8 Joint Stock Co. has recently opened the Green Building project in District 9 for final sale at prices of around 1 billion dong per unit. The project owner said BIDV would grant buyers loans worth as much as 85% of the condo values with an interest rate of 12% for the first six months.

Realty firms hoped lending rate reductions would give a positive sign to the currently slowing down apartment market.

A close look at lending rates

To attract attention of homebuyers, many banks have carried out soft loan programs. However, preferential lending rates are only available within the first 12 months at most, and then will be negotiated in accordance with the market interest rates.

For instance, Vietinbank has launched a 5-trillion dong credit package with a lending rate of 12%. This rate, however, is only applied in the first three months for short-term loans and two months each year for long-term loans.

Similarly, VPBank provides credits with an interest rate of 12% for the first three months. Thereafter, lending rates will be adjusted in accordance with VPBank’s regulations.

Therefore, a banking expert advised homebuyers to take a close look at their loan contracts, especially the lending rates after preferential terms are over.

The central bank’s governor signaled the ceiling deposit rate would be slashed by another percentage point within this year. Therefore, lending rates will be cut further in line with deposit rates, offering more chances to homebuyers.

When to buy houses?

Le Tham Duong, dean of the Business Administration Faculty at the HCM City Banking University, remarked now is the good time for those with urgent demand for houses to realize their dream. However, he stressed the current lending rates are still beyond reach of many middle-income earners.

He stated interest rate is only a factor contributing to the prosperity of the market. Lending rate cuts as recently announced are still not enough to lure investors back into the property market.

Economic expert Dinh The Hien said the current market trend allows homebuyers to select houses at prime locations with reasonable prices.

As for short-term investors, they should consider more carefully as the economic woes might continue into next year. It is unlikely that property prices would pick up from now to 2013, so now is not the right time for surfing investors.

Meanwhile, there are still opportunities for long-term investors, who are actually financially capable and do not expect profits in a short time, said Hien.

The economic expert said investors should not pour money into the apartment projects that have just completed footing construction. Instead, they should invest in the finished and near-completion projects.

With completed apartments, investors can lease them out in case they cannot be sold yet, Hien said.

According to a market research of Jones Lang LaSalle, there are some 85,000 apartments on offer in HCM City, including around 39,000 incomplete ones.

The apartment market will welcome an additional 16,300 units in late this year