Ministry of Construction Proposes Tightening Lending Rules to Cool Housing Prices

Strategic Insights -

The Ministry of Construction (MC) has proposed tightening lending rules to curb speculation and cool soaring housing prices in Vietnam. The draft government resolution, aimed at strengthening market controls and stabilizing real estate prices, includes capping loans for buyers of a second home at 50% of the contract value and 30% for a third home or more. The proposal also emphasizes the development of affordable housing and requiring real estate transactions to take place through a State-run trading centre to improve market transparency and curb speculation.

Key Takeaways:

  • The MC proposes capping loans for buyers of a second home at 50% of the contract value and 30% for a third home or more to curb speculation and cool housing prices.
  • The draft government resolution emphasizes the development of affordable housing, with a requirement for at least 30% of commercial housing projects planned for 2026-30 to be allocated to affordable housing.
  • Developers of affordable housing projects would receive incentives, including direct selection without bidding and streamlined procedures, and would be allowed a maximum profit margin of 20% of total investment, including land use fees.
  • Homebuyers under lease-to-own contracts at these projects would not be permitted to transfer or resell their properties, in line with existing regulations aimed at preventing speculation.
  • Housing prices in cities such as Ha Noi and HCM City have risen sharply, far outpacing household income growth, with apartment prices in HCM City more than doubling since 2018.
  • Total outstanding loans in the real estate sector reached VND399 trillion, up 14.6% from the end of last year, with a bad debt ratio of 2.44%.
  • The real estate market structure is highly imbalanced, with mid- and high-end segments abundant but affordable, social, and rental housing in short supply.
  • The issuance of a resolution to control and stabilize real estate prices has become pressing to promote stable and healthy market development, while also safeguarding social welfare and macroeconomic stability.

Statistics:

  • Housing prices in HCM City have more than doubled since 2018, reaching up to VND120 million (US$4,700) per square meter in the third quarter of this year.
  • Prices of villas and townhouses in Ha Noi have risen by 22-29% annually, with some projects climbing by as much as 60%.
  • Household incomes in HCM City have grown by only 6-7% per year.
  • Total outstanding loans in the real estate sector reached VND399 trillion, up 14.6% from the end of last year.
  • Bad debt ratio in the real estate sector is 2.44%.

Sources:

  • Ministry of Construction (MC)
  • Savills HCM City
  • Khang Land
  • National Economics University
  • Economic experts (Ainh Thao, Hia fn, Phao!m Thao? Anh, Le Xuan NghA(c)a)