Home loans expected to drive retail credit growth in 2024

Home loans will be a driver for retail credit growth in the near future as interest rates keep cooling down and the real estate market recovers from the second half of 2024, analysts predicted.

In a recent report, analysts from Vietcombank Securities Company (VCBS) said they expected a recovery of the real estate market from the second half of this year when the actual demand for buying houses to live in is still high and the need for property investment increases again.

Retail credit is decelerating as demand for consumer loans, home purchases, car purchases and property investments all decline. The proportion of retail credit of total outstanding loans decreased from 47% at the end of 2022 to 46% at the end of the third quarter of 2023.

According to VCBS, home loans have been the main growth driver for many years with a five-year compound annual growth rate (CAGR) of 26%. However, growth slowed in 2023 due to high interest rates and a frozen real estate market. At the end of the third quarter of 2023, outstanding home loans decreased by 1 percentage point over the same period of the previous year, accounting for 13.8% of total outstanding loans.

VCBS forecasts loans for real estate and construction enterprises will continue to increase rapidly, but there will be a differentiation in capital access between real estate segments and enterprises in the market. Specifically, credit will focus on the affordable real estate segment that serves real housing needs, industrial parks and transportation infrastructure construction.

However, part of the credit will be disbursed to real estate enterprises, which face financial difficulties, for the purpose of debt restructuring.

VCBS reported that by the end of the third quarter of 2023, outstanding loans to real estate enterprises and construction sector loans of credit institutions increased by about 13.4% since the beginning of the year, higher than the credit growth of the entire banking industry. The two types of loans accounted for 7.7% and 8.3% of the entire banking industry’s total outstanding loans, respectively.

According to experts, after a period of tightening credit for real estate enterprises, banks have begun to promote disbursement to real estate developers, because the real estate market has shown signs of recovery in the wake of declining interest rates and the Government’s legal support under Resolution 33/NQ-CP 2023 and Circular No. 10/2023/TT-NHNN on solutions to remove difficulties for the development of real estate market.

Banks have also increased lending to meet the increasing demand of real estate enterprises in the context of decreasing interest rates and an unfavourable corporate bond environment./.