After the period with “hot development,” the real estate market is believed to be the “culprit” causing the deadlock to the national economy. The freezing real estate market has made the goods circulation get stuck, thus paralyzing the big resources in the society.
How big is the dead capital?
Experts said the real estate prices have increased by 10 times over the last 10 years, which explains why the cash has been flowing into the real estate sector. In the golden age, the outstanding loans provided to the sector accounted for 10 percent of the total outstanding loans of the national economy.
A report by the National Finance Supervision Council showed that by June 2011, the real estate outstanding loans had accounted for 9.95 percent of the total outstanding loans (245 trillion dong). The proportion is relatively high if compared with that in other regional countries like Thailand (6 percent) and Malaysia (7 percent).
In 2012, the bank capital flow to the real estate sector decreased significantly owing to the credit tightening policy. According to the State Bank of Vietnam, by April 20, the real estate products left unsold had reached 158 trillion dong. Meanwhile, the figure, according to the National Finance Supervision Council was 350 trillion dong.
Vu Dinh Anh, a well-known economist, has noted that the figures do not count on the loans mortgaged by real estate products. If these are counted on, the real estate outstanding loans would be much higher, since 70 percent of the loans’ values have been mortgaged with real estate products.
The National Assembly’s Chair Nguyen Sinh Hung said if noting that the total outstanding loans to the national economy has exceeded the 2000 trillion dong threshold, and that real estate credit accounts for 50 percent, this means that 1000 trillion dong has been buried in the real estate market.
If so, real estate products are the ones which have the highest inventories, which has led to the stagnation of many other sectors and the whole economy as well.
There has been no statistics about the scale of the “real estate iceberg,” because the real estate market still lacks transparency.
Minister of Planning and Investment Bui Quang Vinh said real estate inventories have not been included as a statistical item. Meanwhile, the Ministry of Construction has only asked enterprises to provide figures about inventories recently.
A big waste of society’s resources
It is not only commercial banks which suffer from the real estate bad debts. The dead money has influenced all subjects in the national economy. The capital provided to the real estate market from banks accounts for 1/3 of the total investment capital in the market. Besides, people’s savings, overseas remittance and foreign direct investment have also poured into the real estate sector.
A report by the National Finance Supervision Council showed that 34 percent of the families which have investment activities favor to make investment in the real estate sector. 68 percent of borrowers get bank loans for the investment purpose, while only 32 percent borrow money to buy houses for their accommodation.
Meanwhile, up to 52 percent of overseas remittance has been poured into the real estate sector.
A report by a real estate consultancy firm showed that in the apartment market segment alone, 70,000 apartments have been left unsold in Hanoi and HCM City. If noting that an apartment is valued at one billion dong, the dead capital would be 70 trillion dong.