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Real estate loans: Why?
Does a "gap" still exist between policy and implementation?

According to numerous studies, the banking system is currently the "main artery" providing approximately 70-80% of the total capital for the economy, especially for real estate – a sector requiring large and long-term capital.

Over the years, despite the government's directive to strictly control speculative real estate credit and focus on meeting the actual housing needs of the people, the structure of capital allocation has not yet achieved the expected results.

For example, according to the State Bank of Vietnam, by the end of 2025, the total outstanding loans for social housing will reach approximately VND 41,000 billion, while the outstanding loans for the entire real estate sector will be VND 4.74 million billion. By the end of January this year, commercial banks had agreed to lend VND 20,500 billion, reaching 17% of the VND 120,000 billion credit package (later increased to VND 145,000 billion), indicating that the remaining capital is still very large.

Explaining the reasons, Mr. Bui Van Doanh from  the Vietnam Institute of Real Estate Research (VIRES) stated that, considering the business efficiency of the banking system, loans for real estate investment are often more attractive due to their large scale, high-value collateral, and customers with strong financial capacity. Conversely, homebuyers, especially those with middle and low incomes, typically borrow smaller amounts, have weaker credit profiles, and face higher risks, making them less appealing to credit institutions without sufficiently strong incentive mechanisms.

Mr. Bui Van Doanh - Vietnam Institute of Real Estate Research (VIRES).

From a technical standpoint, distinguishing between genuine housing needs and speculative investments remains a difficult problem. On credit records, most loans are declared as intended for "buying to live in," while in reality they may serve various other purposes such as asset accumulation, short-term speculation, or long-term investment. Without a comprehensive data system and effective monitoring tools, classifying borrowers to apply differentiated credit policies is virtually impossible.

Furthermore, the market's supply structure is not aligned with the regulatory objectives. The affordable housing and social housing segments serving genuine housing needs remain insufficient, while the supply of high-end and investment-oriented products accounts for a large proportion. This means that even when prioritizing credit for genuine housing needs, the banking system lacks sufficient suitable "outlets" to disburse funds.

Another significant bottleneck lies in the way policy is implemented. For many periods, real estate credit control has primarily been exercised through quantitative tools such as growth limits (credit room) or risk coefficients applied uniformly to the entire sector (except for social housing). This approach inadvertently creates a "leveling" effect, where loans for both residential and investment purposes are tightened or loosened at the same rate, undermining the effectiveness of capital flow management.

Furthermore, the defensive mindset of banks in the context of bad debt risks and complex classification also leads them to tend to tighten lending across the board, adopting a "better to tighten than to miss" approach.

Associate Professor Pham The Anh, Head of the Economics Department at the National Economics University, analyzed that the expansion of credit and the application of almost uniform interest rates have made it easier for speculators to access cheaper capital, while workers have less need for loans due to a shortage of suitable supply. Because of this lack of differentiation, whenever credit is loosened or interest rates decrease, capital tends to flow strongly into speculative real estate instead of serving actual housing needs.

Assoc. Prof. Dr. Pham The Anh, Head of the Economics Department, National Economics University.

At a deeper level, the lack of synchronization among policy tools also undermines regulatory effectiveness. When credit is controlled but the tax system is not strong enough to curb speculation, money can still find its way to the market through other channels such as equity capital, bonds, or other forms of non-bank fundraising. 

Mr. Bui Van Doanh further analyzed that, from the perspective of real estate businesses, prioritizing the high-end segment to maximize profits is understandable. Therefore, this contributes to the strong flow of credit capital into this segment and to customers with investment purposes.

Finally, the psychological factor of the market cannot be ignored. In a context where real estate is still considered a safe asset class with expectations of long-term price appreciation, even the demand for buying for personal use is intertwined with both asset accumulation and investment motives. The line between "actual residence" and "speculation" is therefore becoming increasingly blurred, reducing the effectiveness of any efforts to separate capital flows if relying solely on credit tools.

The combination of these factors shows that the problem lies not in policy direction, but in the gap between objectives and implementation tools. When policies aim for differentiation but the operating system remains "leveling," capital flows are unlikely to accurately reach areas with real demand as expected.

Real estate credit "valve": Flow in the right direction, tighten in the right place.

Currently, the focus is primarily on preferential policies and credit packages to support the social housing segment. However, these preferential packages have not achieved the expected results, judging by the disbursement figures over the past year.  Despite hundreds of trillions of dong in preferential capital, many businesses developing projects or individuals wishing to purchase social housing still find it difficult to access the funds due to obstacles in the application and legal approval process.

Furthermore, for credit programs implemented through commercial banks,  interest rates for loans to purchase or develop social housing are set 1.5-2% lower than the market average, thus subject to considerable volatility. 

Specifically, with current mortgage interest rates reaching 14-15% per year, interest rates for social housing loans have also surged to 12% per year.  This rate is more than double the fixed rate of 5.4% per year stipulated in  Government Decree No. 100/2024/ND-CP ( applicable to social housing loans through the Social Policy Bank, although the scope of application is relatively narrow). 

It is evident that while credit policies for social housing have established good mechanisms, achieving real effectiveness requires actively increasing supply and streamlining procedures for this segment.

Besides prioritizing social housing, according to Associate Professor Pham The Anh, in order for capital to reach real needs, credit policies need to clearly distinguish the purpose and target of capital use. "Workers borrowing to buy their first home should enjoy preferential interest rates, possibly at 4-5% per year. Meanwhile, those borrowing to buy a second, third home or for investment purposes should bear higher interest rates according to a progressive mechanism," the expert suggested.

To ensure that capital reaches real needs, credit policies must clearly distinguish between the purpose and the users of the funds. (Illustrative image)

At the same time, the expert suggested that the loan-to-value ratio for second, third, and subsequent homes should also be limited. For the first home, the loan limit could be up to 70-80% of the property value, but for the second home and subsequent homes, this ratio should be capped at 50% or even lower, depending on the number of homes owned.

In fact, in 2025, the Ministry of Construction proposed limiting the loan-to-value ratio to no more than 50% of the contract value for the second home and no more than 30% for the third home and beyond. However, this proposal has not yet been implemented, partly due to the lack of and inconsistency in real estate databases.

According to Associate Professor Pham The Anh, this obstacle has been overcome since real estate properties were assigned electronic identification codes from March 1, 2026. This is an important data foundation for designing credit policies that are more clearly categorized; the key is to issue and enforce them decisively as soon as possible.

Regarding credit classification, Mr. Bui Van Doanh suggested that a similar approach should be applied not only to homebuyers but also to real estate development businesses. Accordingly, social housing projects, affordable housing projects meeting real housing needs, industrial zones, etc., should be prioritized for access to low-cost capital. 

Associate Professor Pham The Anh added that businesses borrowing capital to develop a real estate project, if they continue to borrow to hold onto another project before completing that project, will have to bear a higher interest rate. 

In addition, strict credit controls on projects with excessively high valuations or those using significant financial leverage could also put pressure on developers to adjust selling prices to more reasonable levels, thereby improving the supply of affordable housing.

"Without differentiation, the development of social housing and affordable housing is unattractive due to low profit margins. With support, it could encourage developers to build affordable housing because this segment still has very high demand, is easily liquidated, and has a faster absorption rate. Affordable and mid-range housing still has great potential if supported by reasonable credit policies and improved supply," the expert commented.

Regarding borrowers, specifically businesses developing projects, Associate Professor Pham The Anh warned that banks need to pay special attention to the valuation of collateral. If real estate is valued higher than its true value and banks disburse a large proportion of the loan, negative consequences could arise for the credit system itself. "If banks abet the artificial inflation of real estate prices, they will also fall into a spiral of risk along with the businesses ," the expert emphasized.

A comprehensive regulatory strategy is needed.

From the above analysis, it can be seen that  monetary policy is not a "magic wand" that can solve all the shortcomings and regulate the real estate market for stable and sustainable development.  It is an important tool, but if operated in isolation, it will be difficult to address the structural problems of the market.

As long as returns from real estate investment remain attractive, capital will continue to flow into this sector despite rising borrowing costs. Therefore, to ensure that capital is allocated and used effectively, flowing into genuine housing needs as well as production, business, and innovation sectors, it is necessary to reduce the attractiveness of real estate speculation.

According to Associate Professor Dr. Ngo Tri Long, an economic expert, to achieve this, market regulation needs to be implemented synchronously across many aspects, from monetary and fiscal policy management, tax system reform, supply-demand regulation, and diversified capital market development. Only when policies are designed holistically and implemented consistently can the real estate market develop healthily and sustainably.

Associate Professor Dr. Ngo Tri Long, economic expert.

Firstly, while monetary policy helps ensure that credit flows to the right places and in the right direction, tax policy is considered an effective tool for controlling speculative behavior and guiding the market towards healthier development.

Currently, the real estate tax system in Vietnam remains relatively simple and not strong enough to curb land hoarding or speculative trading. The real estate transfer tax is primarily applied at 2% of the transaction value, regardless of the holding period. This allows for short-term buying and selling activities to remain common, contributing to increased speculation in the market.

One solution proposed by many experts is to improve tax policies to regulate behavior in the real estate market. According to Associate Professor Pham The Anh, applying a progressive tax on those who own multiple properties, along with adjusting transfer taxes based on the holding period, could help curb speculation, hoarding, and short-term trading.

Furthermore, taxing abandoned land or slow-developing projects is also considered an important tool to encourage the efficient utilization of assets. More broadly, if properly designed and implemented consistently, tax policies can help reduce the attractiveness of speculation, thereby directing capital flows towards sectors that create real value for the economy.

The second combined tool is fiscal policy . According to  Associate Professor Pham The Anh, it is necessary  to focus on improving the efficiency of public investment, selectively reducing taxes for real estate projects serving production and social welfare, and promoting innovation and digital transformation to enhance the added value of industrial parks and smart cities.

Thirdly , experts generally agree that the fundamental solution to stabilizing and sustainably developing the real estate market is to increase the supply of housing that meets the actual needs of the people.

In reality, the Vietnamese real estate market has recently experienced a significant imbalance between supply and demand. While the high-end segment has continuously expanded, there is a serious shortage of products serving genuine housing needs, such as social housing and affordable housing. As  a result, in Hanoi and Ho Chi Minh City, the average selling price of primary apartments is expected to exceed VND 100 million/m² and VND 120 million/m² respectively in 2025.  This situation makes housing increasingly difficult for the majority of the population.

To address this situation, the government has set a target of building approximately 1 million social housing units by 2030 through national housing development programs. However, the 5,158 and 12,799 units completed in Hanoi and Ho Chi Minh City in 2025 are still far too few compared to actual demand.

Therefore, experts suggest that local authorities need to play a more proactive role in developing social housing funds. Instead of just calling on businesses to participate, the government could directly invest in construction and sell or lease these housing units, similar to the model already applied in many countries. The national housing fund is also a project receiving high expectations, although there are still many concerns surrounding its operational methods.

Furthermore, removing legal obstacles for real estate projects is also considered a crucial solution to increase market supply. According to Associate Professor Dr. Ngo Tri Long, reforming administrative procedures and shortening project approval times can help projects be implemented sooner, thereby supplementing housing supply and reducing pressure on price increases.

He also emphasized the importance of building a transparent data system on prices, transactions, and supply in the real estate market. According to Associate Professor Dr. Ngo Tri Long, a healthy market needs a comprehensive database so that investors, banks, and regulatory agencies can make accurate decisions, thereby contributing to a more stable and sustainable market development.

Fourth, according to Mr. Bui Van Doanh, reducing dependence on bank credit is an urgent requirement for more stable market development. "Without restructuring the capital market, all efforts by the banking sector to regulate credit will be like throwing salt into the sea ," he said.

Experts emphasize that, to alleviate pressure on the banking system, Vietnam needs to strongly develop long-term capital mobilization channels for real estate such as corporate bonds, the stock market, real estate investment trusts (REITs), and foreign direct investment (FDI)...

How should capital channels be developed to share the pressure on the banking system? What should entities in the real estate market do to increase their resilience in the context of persistently high interest rates? Reatimes will continue to provide updates. 

 

Communications by An Huy Group

According to Realtimes Real Estate Magazine