deposit-interest-rates-fall-money-flows-into-real-estate

Vietnam: Deposit interest rates fall, money flows into real estate

As deposit interest rates fall, cash flow has changed its direction with more people injecting money into real estate as a long-term shelter.

Nguyen Bao Nam in Ba Dinh District in Hanoi some months ago bought a two-bedroom apartment I a project in the western part of Hanoi which was under construction at VND2 billion. The building has been opened and the apartment price is VND2.5 billion.

Nam said real estate was the most profitable investment channel for people with idle money.

Deposits are no longer attractive because banks have continuously cut deposit interest rates.

A report says commercial banks continued easing deposit interest rates by 0.2-0.4 percent in late August, causing deposits at banks to fall to a 10-year low. Analysts have estimated that bank deposit interest rates have decreased by 1.5-2.5 percent over the last year.

Meanwhile, there are high risks in securities investments, and stock prices have increased too sharply and the margin rate of new players is high.

As for gold, the prices fluctuate and are unpredictable. Also, domestic prices are high compared with world prices.

Do Thu Quynh, an investor in Cau Giay district in Hanoi, decided to buy an apartment in Gia Lam. The infrastructure has been completed, and the price is within her financial capability. More importantly, the developer has offered preferential interest rate policies to buyers.

“I think it’s now reasonable time to buy houses. Buyers have many choices about products,” she said.

A market report from batdongsan.com.vn showed that despite the negative impact on the economy caused by Covid-19, interest in real estate was up 37 percent over the same period last year.

After the first pandemic wave, the interest in the market increased by 306 percent. The figure was 62 percent after the second wave and 378 percent after the third wave.

A report from Savills Vietnam about the Hanoi real estate market showed that this was the 10th consecutive quarter that apartment selling prices increased in the first half of the year.

The average primary price offered was $1,625 per square meter, an increase of 7 percent quarter on quarter and 11 percent year on year.

B-class projects saw the sharpest increase, 13 percent year on year. In HCM City, nearly 40 percent primary projects had reported prices increasing by 15 percent within one quarter.

Most commercial banks are now providing credit to fund house purchases with the preferential interest rates of 7-8 percent for the first two years. The floating interest rates for following years will be about 9-11 percent per annum.

Nguyen Van Dinh, Secretary General of the Vietnam Association of Realtors (VAR), said that the total money flowing into the real estate market has increased sharply recently. A large amount of money from securities and forex, and other business fields, has been heading for the property market.

He predicted that house prices would continue rising by 10 percent in 2021 compared with last year.

Vu Ai Le from Suntimes Group said with the moves to settle the problems in policies and procedures of real estate businesses, the real estate market will develop.

Meanwhile, Hoang Thi Loc from The Light Group said that real estate is the priority investment channel for many people now, as plans on amending the laws are expected to be completed in 2021.

Some new policies will take effect in 2021, including the 2020 Investment Law and the 2020 amended Construction Law. Circulars 21/2019 and Decree 148/2020 will help the real estate market become more transparent.

Experts have agreed that the market won’t see a real estate bubble, because the money poured into the market is ‘real money’, not borrowed money. 

D. Anh

Source: https://vietnamnet.vn/en/feature/deposit-interest-rates-fall-money-flows-into-real-estate-773108.html