Friday , June 21 2024

Property sector faces low sales amid high interest

Sales are down at real estate companies in the South as potential homebuyers can’t afford current lending interest rates of around 13-14%

VnExpress has found that sales over the last six months at five top southern property companies have fallen 80-90%.

Real estate consultancy DKRA Group has said that housing demand in Ho Chi Minh City and its neighboring provinces decreased sharply in the first quarter of 2023 against the fourth quarter of 2022.

One deputy general director of a property company in the city told VnExpress that even people in real need of homes are reluctant to buy due to the unaffordable borrowing rates.

He said that potential middle-class homebuyers can on average afford to pay about 40% of a home’s price, and thus have to resort to bank loans to pay the rest. But current bleak economic prospects coupled with the high interest rates have made them unwilling to do so.

“The lending interest rate of up to 14% per year is so high that many people have delayed home purchase,” said Ngo Quang Phuc, CEO of real estate firm Phu Dong Group.

Phuc proposed that commercial banks should decrease lending interest rates to assist both real estate developers and buyers, and facilitate cash flow in the economy.

But Nguyen Mac Hoai Nam, CEO of Nam Phat Consulting Service Company, said that even if lending interest rates are reduced by 1-1.5 percentage points to 12.5-13%, the cost will still be too high for many potential homebuyers.

Can Van Luc, chief economist at lender BIDV, said lending interest rates will decrease later this year.

He added that the real estate market would improve in the fourth quarter, when rates are expected to drop considerably.

Luc noted that buyers of social housing will be able to borrow from a VND120 trillion ($5.08 billion) government support package at annual interest rates of 8.2%.

From now until June 30, qualifying homebuyers can borrow at the rate for a term of five years, according to the State Bank. Social project developers will be charged an annual rate of 8.7% for three years.

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