Vietnam c.bank warns of real estate credit risks amid rapid loan growth

Outstanding real estate loans reached VND4.08 quadrillion (US$161.67 billion) as of July 31, a 16.95-percent increase from the end of 2024, according to a report from the SBV.

The figure accounts for 23.68 percent of total outstanding credit in the economy.

The SBV said the pace of credit growth in the sector outstripped the economy-wide average and is increasingly concentrated in property business loans.

The report also showed the sector’s bad debt ratio stood at 2.43 percent, with loan balances continuing to rise.

Of the total real estate credit, VND1.79 quadrillion ($70.92 billion), or 43.98 percent, was given to property business activities, while VND2.28 quadrillion ($90.4 billion), or 56.02 percent, was real estate loans for individual customers.

Regulatory measures ramped up to contain risks

To mitigate risks, the central bank has tightened regulatory controls, raised risk weightings on property-related loans to as much as 200 percent, and required higher loan loss provisions, the report said.

A separate report from the Ministry of Construction showed real estate business credit stood at over VND1.6 quadrillion ($69.74 billion) as of May 31.

That suggests nearly VND2.5 quadrillion ($109 billion) in additional credit entered the sector during June and July alone, though updated data for September were not available.

“The increase shows that a large volume of capital has flowed into the real estate market in a short period,” the SBV said, warning that continued reliance on short-term bank funding for long-term investments poses liquidity risks if borrowers default.

The central bank also cited imbalances in housing supply and affordability.

It noted that the house price-to-income ratio in Vietnam stands at 23.7, significantly higher than the global average of 14.6.

“Some real estate developers have poor financial capacity, while long-term funding channels such as equities and corporate bonds remain underdeveloped,” the SBV said.

In a set of policy recommendations, the SBV called on the Ministry of Finance to draft new tax rules targeting speculative land use, including higher taxes on owners of multiple homes, underutilized land, and delayed land development.

The SBV also urged the finance ministry to strengthen regulations governing the securities and corporate bond markets to support more stable long-term capital formation.

For local governments, the central bank recommended accelerating administrative procedures for housing and property development projects to ease supply bottlenecks and facilitate project delivery.

The SBV also asked the Ministry of Agriculture and Environment to curb corruption and misconduct in land auctions, which it said can distort the market and encourage speculation.