Property market hopeful as interest rates drop

Push factor: Vehicles drive along a road in the old quarter in Hanoi. A dip in interest rates would likely result in much-needed improvement in the property market. — Bloomberg

HANOI: There have been positive signs for the property market’s recovery, say industry experts and economists.

In an earlier development, for the first time in the last two years, the central bank decided to cut interest rates by 1%, bringing the discount rate from 4.5% to 3.5% overnight rate for inter-bank from 7% to 6% annually.

According to the central bank, average inter-bank overnight rates have fallen by as much as 0.8%, to 2.7% on March 20, marking the first dip under 3% since the end of August last year.

Economist Can Van Luc, a member of the national finance and monetary council, said a dip in interest rates would likely result in much-needed improvement in the property market.

Luc said it might translate into lower prices as investors gained access to lower-interest loans while giving them a financial boost to finish ongoing projects or start new projects.

In addition, a lower rate might give buyers more confidence to make purchases and improve market attitude in general as many potential buyers were sitting on the fence waiting for prices to drop further.

“Since the beginning of the year, interest rates have dropped by 1% to 2% with commercial banks introducing additional credit packages. It can be expected that rates may further decline in the near future,” he said.

However, Luc remained cautiously optimistic about the effect of lower rates on the market, saying not all businesses might benefit the same.

Established developers with many previously successful projects and competent financial management would likely receive better offers from banks and buyers.

In light of the corporate bond market, property developers were able to issue 20 trillion dong (RM3.76bil) worth in bonds since March 5 when numerous policy changes took place to stabilise the market, a marked improvement over 2022 after a number of violations and high-profile arrests put the market to a halt.

According to a report by VNDirect, corporate bonds from property developers for the entire year of 2022 were recorded at 62 trillion dong (RM11.67bil), a 79% decline compared to the previous year. — Viet Nam News/ANN

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