Credit Concentration in Real Estate: Rising Risks of Imbalance and Inequality

The decline suggests money is moving more slowly through the economy, reflecting weak consumption, cautious business sentiment, and a growing tendency to save. As a result, liquidity has remained concentrated mainly within the financial system rather than supporting demand and production.

Surging housing prices and credit concentration in real estate present growing macro-financial risks 

According to a recent World Bank report, high corporate leverage in Vietnam remains heavily concentrated in the real estate sector. Alongside other policy tools, the State Bank of Vietnam (SBV) has used credit growth targets for the banking sector, with individual quotas for each bank, to support economic activity and maintain its 4% inflation target. However, several consecutive years of double-digit credit growth following the COVID-19 crisis have pushed Vietnam’s credit-to-GDP ratio to 145%, the highest in ASEAN and among the highest among lower-middle-income economies. Real estate accounts for around one-quarter of total outstanding credit, creating a potential source of risk, with roughly half of that lending extended to developers. The banking system’s capital adequacy ratio reached 12.1% at the end of the first half of 2025, lower than in several other ASEAN economies.

According to the World Bank’s report, rising real estate prices are also widening wealth inequality and reducing housing affordability. In some areas, land and housing prices have climbed to more than 30 times the annual income of many households, far above international affordability benchmarks, which typically range from three to eight times income. This has made it increasingly difficult for first-time homebuyers to enter the housing market. Rising rents and heavier mortgage payments are reducing disposable income for low- and middle-income households, weakening overall demand and widening inequality. Households without property are being pushed further out of reach of homeownership, reflecting a sharp decline in housing affordability.

Concentrated lending to real estate also creates macro-financial risks, including weaker asset quality and broader financial instability. A downturn in the property sector could quickly lead to rising non-performing loans. Banks that rely on short-term deposits to finance long-term property loans also face maturity mismatch risks, and a sudden liquidity withdrawal could put pressure on balance sheets. The corporate bond market disruption in 2022 and 2023, together with the SCB case, showed how quickly stress in the property sector can spread across the broader financial system.

To address these imbalances, the government has made efforts to redirect credit toward affordable housing. However, according to the World Bank, implementation has remained slow and fragmented. The government has introduced three main programs: the 2022 to 2023 interest rate support program, which provided a 2% interest subsidy from the state budget for businesses, cooperatives, and household businesses under the post-COVID-19 economic recovery and development program under Decree 31/2022/ND-CP; the 2023 to 2030 social housing credit package, which offers loans at interest rates around 1.5 to 2 percentage points below market rates for developers and homebuyers in social housing projects; and the “One Million Homes” program for 2021 to 2030, aimed at building at least one million affordable housing units for low-income households and workers in industrial parks. These policies are intended to reduce entry costs for developers through land-use fee and tax incentives, infrastructure support, and preferential credit, while expanding housing access for buyers through preferential loan programs and longer repayment terms.

Even so, according to the World Bank, while the policy framework and financing mechanisms are already in place, implementation continues to face legal bottlenecks, slow land clearance, low profit margins for developers, and complex verification procedures for eligible beneficiaries. As a result, affordable housing programs have yet to deliver as expected, supply remains limited, and access to housing continues to be difficult for low-income households.