Since the outbreak of the COVID-19 pandemic in January, the State Bank of Vietnam (SBV) has slashed rates three times, in March, May and October to aid economic recovery, which helped ease the pressure of provision cost for banks and interest expenses for customers and enabled lenders to introduce stimulus packages for home purchases.
According to Tran Khanh Hien, deputy head of Investment Analysis at VNDirect, the rate for home loans was reduced by about 1.8 percentage points to 9.5 per cent, the lowest rate in the past decade.
“In the context of cooling inflation pressure, we expect the SBV to maintain an adaptive monetary policy in 2021. Although we do not expect further rate cuts, we believe the SBV will not raise rates in 2021 to aid the economy through maintaining loose monetary policies,” Hiền said.
“Thus, the interest rate for home loans will be maintained at low levels in 2021 to stimulate demand for the housing market.”
VNDirect also predicted a robust recovery of the housing market next year fuelled by the country’s macro-economic recovery.
The global production shift expected to drive investment flow into Vietnam will benefit the real estate market, especially industrial property. The Government’s efforts to hasten public investment disbursement with a focus on infrastructure development have also aided the real estate market.
The report also forecast that new supply would skyrocket due to the expectation that the amendments to Law on Construction and the Law on Investment 2020 which take effect from the beginning of next year will tackle legal bottlenecks.
With a number of projects set to resume construction in 2021, VNDirect forecast new supply in HCM City would increase by 10-15 per cent to reach 17,000 apartments.
In Hanoi, the supply was predicted to increase by 50-60 per cent in 2021 to reach 23,000 apartments, mainly from mega-projects like Vinhomes Smart City, Vinhomes Ocean park, Sunshine Empire and Gamda City.
Regarding housing prices, VNDirect said that the trend was to rise, driven by improved demand and low-interest home loans.
Still, there would be no market bubble in the short term, VNDirect stressed. The market was now different from 2009-10 when inventories were high and prices were inflated, leading to the market collapse in 2013.
Now, the market has limited supply and high demand while the cash flow continues to be pumped in the market.
Vietnam’s real estate market had a cycle of seven years and the market could enter a strong growth period in 2021 if legal bottlenecks were tackled properly, VNDirect said.
The M&A activities are predicted to be robust next year as a number of small developers have fallen into difficulties due to the legal bottlenecks and impacts of the COVID-19 pandemic, creating opportunities for those with financial capacity.