Research on the impact of real estate prices on bank credit - 1

MINISTRY OF EDUCATION AND TRAINING

UNIVERSITY OF ECONOMIC HO CHI MINH CITY

NGUYEN TRUNG HOANG

RESEARCH IMPACTS OF REAL ESTATE PRICES ON BANK CREDIT IN HCMC

Specialization: Finance – Banking

Code: 60340201

MASTER THESIS OF ECONOMY

SCIENCE INSTRUCTOR:

Assoc. Prof. Dr. TRAN THI XUAN HUONG

Maybe you are interested!

Ho Chi Minh City – 2013

GUARANTEE

I hereby declare that all content of this thesis is completely formed and developed from my personal points of view, done by myself; The collected data and analysis results in the topic are honest. I take full responsibility.

November 11, 2013

Students perform

Nguyen Trung Hoang

TABLE OF CONTENTS

Side page cover

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Table of contents

List of symbols and abbreviations

List of drawings, tables

INTRODUCTION ……………………………………………………………………… …………………………… …………………..first

CHAPTER 1 – THEORETICAL BASIS IMPACT OF REAL ESTATE PRICES ON BANK CREDIT………………………………………… …………………………… …………5

1.1 Real estate prices …………………………………………………………….. …………………………… ………..5

1.1.1 The concept of real estate prices ………………………………………………………… ……………………………5

1.1.2 Factors affecting the price of real estate ………………………………………………. …………6

1.1.2.1 Factors directly related to real estate ………………………….. …9

1.1.2.2 Legal factors related to real estate ………………………………… …..ten

1.1.2.3 External factors …………………………………………………………….. ……………………….11

1.1.3 Methods of determining real estate prices …………………………………………………………… …………………….twelfth

1.2 Bank credit ……………………………………………………………….. …………………………… ………15

1.2.1 Concepts …………………………………………………………….. …………………………… …………15

1.2 Characteristics of bank credit ……………………………………………………………….. ………….16

1.2.3 Categorization …………………………………………………………………… …………………………… ……………..17

1.2.4 The role of bank credit …………………………………………………. ………….19

1.2.4.1 For banks ……………………………………………………………….. …………………………………………19

1.2.4.2 For the economy ………………………………………………. ……………………………20

1.3 The impact of real estate prices on bank credit ………………………………………………………… ………21

1.3.1 Interaction relationship between bank credit and real estate prices…..21

1.3.2 The impact of real estate prices on bank credit ………………………………………….. ….23

1.3.3 Some empirical research results in the world on the impact of real estate prices on bank credit ………………….. …………………………… ………..24

Conclusion of chapter 1 …………………………………………………………………………… …………………………… ………..28

CHAPTER 2 IMPACTS OF REAL ESTATE PRICES ON BANK CREDIT IN HCMC …………………………………………………… …………………………… …………29

2.1 Real estate prices in Ho Chi Minh City …………………………………………………………………………. …………29

2.2 Current status of bank credit in Ho Chi Minh City …………………………………………………… …………34

2.2.1 The process of formation and development of commercial banks in Ho Chi Minh City …………34

2.2.1.1 The commercial banking system in Ho Chi Minh City …………………………………………………… ……………..34

2.2.1.2 Development of the scale of operation …………………………………………………………………………. ……………..36

2.2.2 Developments of commercial banks’ credit activities in Ho Chi Minh City ………………………………… …………38

2.3 Actual situation of the impact of real estate prices on bank credit in Ho Chi Minh City……45

2.4 Testing the impact of real estate prices on bank credit in HCMC ……48

2.4.1 Research methods …………………………………………………………………….. ……………………….48

2.4.2 Steps to carry out the research ………………………………………………………… ……………………………50

2.4.3 Research data …………………………………………………………….. …………………………… …..50

2.4.4 Carrying out the research ……………………………………………………………………… …………………………… 51

2.4.4.1 Testing the stationarity of the variables used in the model …………51

2.4.4.2 Estimation of the lags of the variables used in the model …………………………………………52

2.4.4.3 Granger causality test for the variables used in the model …………53

2.4.4.4 Using the VAR model to estimate the impact …………………………………………………………… ……..54

2.4.5 Evaluation of the results …………………………………………………………….. …………………………… …….57

2.5 Assessing the impact of real estate prices on bank credit in HCMC …….57

2.3.1 Accomplishments …………………………………………………………………………. ………….57

2.3.2 Some Existences ………………………………………………………… …………………………… …………59

2.3.3 Causes ……………………………………………………………………… …………………………… ………59

Conclusion of chapter 2 …………………………………………………………………………… …………………………… ……………sixty one

CHAPTER 3 – RECOMMENDATIONS FOR BANK CREDIT ACTIVITIES IN HCMC STABLE AND SUSTAINABLE GROWTH FROM THE IMPACT OF REAL ESTATE MARKET GROWTH CYCLE IN THE FUTURE ……. …………………………… …………………………… ………..62

3.1 Recommendations for bank credit activities in the current period of negative growth in the real estate market …………………………………………………… …………………………… ……….62

3.1.1 For credit activities of banks ………………………………………… …………63

3.1.1.1 Segmentation of customers …………………………………………………………….. ………………………63

3.1.1.2 Interest rate orientation ……………………………………………………………….. ……………………………………..sixty four

3.1.1.3 Support to solve outputs for real estate businesses…………………………………………64

3.1.1.4 Accelerating the handling of bad debts …………………………………………………………… …………65

3.1.1.5 Implementation of loan interest rate reduction …………………………………………………… ……………………….66

3.1.1.6 Improve risk management capacity, strengthen supervision and inspection of credit activities …………………………………………………… …………………………… …………………………………..66

3.1.2 For business activities of real estate enterprises………………………………………….66

3.1.2.1 Real estate inventory settlement, creating conditions for low-income people ………………………….. …………………………… ………………………………………66

3.1.2.2 Developing the market of low-cost apartments for rent ………………………………… ………….sixty seven

3.1.2.3 Capacity building on capital …………………………………………………………………………. ………….68

3.1.3 Policy of State agencies ………………………………………………………. …………68

3.1.3.1 Implementing the process of restructuring the banking system …………………………………………………………… 68

3.1.3.2 Strengthening supervision of banks to comply with regulations of the State Bank ………………………….. …………………………… ……………………………69

3.1.3.3 Review of assigned projects …………………………………………………………………………. …………69

3.1.3.4 Medium and long-term capital support for banks …………………………………………………… …………69

3.1.3.5 Finalization of legal documents related to the real estate market ……….70

3.1.3.6 Strengthening the handling of bad debts in the economy …………………………………………….. ..70

3.1.3.7 Continue to reduce interest rates, provide more incentive packages for the real estate market ………………………………………….. …………………………… …………………………………………72

3.1.3.8 Support to link actors in the economy …………………………………………………… …………74

3.1.3.9 Assessment and classification of banks to assign credit growth targets ………………………………………………………… …………………………… ……………………………74

3.2 Recommendations for bank credit activities in a time of stable real estate market growth ………………………….. …………………………… …………74

3.2.1 Reducing the frequency of collateral valuation …………………………………………………………………………. …………75

3.2.2 Commitment to stable lending interest rates for a long time ………………………….. ………75

3.2.3 Credit limit guarantee and large-scale loan expansion…………………………75

3.3 Recommendations for bank credit activities in the time of explosive growth of the real estate market ………………………………………….. …………………………… …………75

3.3.1 Regularly check the loan-to-security ratio ………………………………………………………… .75

3.3.2 Strengthening the valuation of collateral assets …………………………………………………… ……………..76

3.3.3 Focusing on assessing the financial capacity of borrowers …………………………………………76

3.3.4 Regularly monitor and evaluate customers’ loans…………………………………………76

Conclusion of chapter 3 …………………………………………………………………………… …………………………… …………….77

Conclude………………………………………… …………………………… …………78

References

Appendix

LIST OF ACRONYMS

1. Real Estate : Real Estate

2. GDP : Gross Domestic Product

3. VAT : Value added

4. Cooperative : Cooperative

5. IRF : Impulse Response Function

6. SBV: State Bank

7. Commercial banks: Commercial banks

8. Credit institutions: Credit institutions

9. Credit institutions: Credit institutions

10.TMCP : Share trading

11.CIT : Corporate income

12.HCMC : Ho Chi Minh City

13.USD : US Dollar

14.VAMC : Asset Management and Exploitation Company of Vietnam Credit Institutions

15.VAR : Vector Autoregression Model

16.VND : Vietnam Dong

LIST OF PICTURES, TABLES

I. Drawings

1. Figure 2.1 : Banking credit performance in HCMC

2. Figure 2.2: Real estate credit balance according to loan demand as of December 31, 2011

3. Figure 2.3: Growth rate of real estate price index and bank credit in HCMC

4. Figure 2.4: Evolution of lending and bank credit interest rates in HCMC

5. Figure 2.5 : Lagged estimation of the variables used in the model

6. Figure 2.6: Granger causality test for the variables used in the model

7. Figure 2.7: Repulsion of variables used in the model

8. Figure 2.8: Variance decomposition of variables used in the model

II. Table of Tables

1. Table 2.1 : Housing market for sale in HCMC Q4/2010

2. Table 2.2 : Housing market for sale in HCMC Q.4/2011

2. Table 2.3 : Housing market for sale in HCMC Q.2/2012

3. Table 2.4 : Housing market attached to land (villas/townhouses) HCMC Q2/2012

4. Table 2.5 : Mortgage ratio of real estate in total collateral of some banks

4. Table 2.6: Funds mobilized by banks in Ho Chi Minh City

5. Table 2.7 : Credit balance of banks in Ho Chi Minh City

6. Table 2.8: Real estate credit outstanding according to loan demand as of September 30, 2011

7. Table 2.9: Descriptive statistics of variables in the model

8. Table 2.10: Testing stationarity of variables used in the model

FOREWORD

1. REASON FOR CHOOSE TOPIC:

After each financial crisis in the world, economists determine the causes and consequences brought about by the crisis and the recovery process of the economy under the direction of policies from the Governments of different countries. countries, draw lessons to increase resilience and limit the impact of future crises.

Characterized by the crisis of the late 1990s in Asia with rapid economic growth for a long time, capital account liberalization, higher interest rates in these countries than in developed countries have led to A large capital inflow through the banking system, the rapid increase in property prices, especially in the real estate sector, stems from the rapid expansion of domestic lending.

There has been a great deal of interest and research done in relation to real estate lending and prices and their interactions. Demand for real estate is more likely to be influenced by the business environment and confidence in the economy. The coincidence of cycles in the credit and real estate markets has been widely documented and discussed in the literature. Especially the studies in Asian countries such as Hong Kong, Taiwan, China, these articles select real estate prices and loan balances in major cities in the country to represent the inclusion of real estate prices and loans in major cities in the country. research model … give different views on this empirical correlation, they all find a close relationship between bank lending and real estate prices, but the direction of influence is not uniform at different stages. before, during and after economic crises, the reason is that excessive loan growth inflated the real estate price bubble or it was real estate prices that fueled the debt fever of households and businesses. .

For example, research in Hong Kong by (Stefan Gerlach and Wensheng Peng, 2005) has suggested that property prices have a one-way effect on lending but in China the opposite direction (Qi Liang and Hua). Cao, 2007) and in East Asian countries the influence is bidirectional (Charles Collyns and Abdelhak Senhadji, 2002). However, it depends greatly on whether the relationship is long-term or short-term, as in the study of (Hofmann, 2003), real estate prices affect bank lending in the long-run relationship but not in the long run. In the short term, they are mutually reinforcing. The complexity in each period will assess the strength and weakness of the influence between these factors.

The results of previous empirical studies show that the relationship of these two variables hardly has a common trend for all markets. Starting from the evidence in Asian countries, how is it in Vietnam.

In addition, this relationship was mentioned again during the global crisis in 2008 partly caused 1

In addition, this relationship was mentioned again during the global crisis in 2008 partly caused by the real estate price bubble, cheap interest rates, subprime mortgage lending into the real estate market. movables.

The research project in Ho Chi Minh City is a representative case because the data set is full of data from January 2009 to May 2012. That is why I chose the topic “Research on the impact of prices real estate to bank credit in Ho Chi Minh City” is looking forward to receiving many comments to improve the research issue.

2. RESEARCH OBJECTIVE:

– The topic focuses on studying whether the impact of real estate prices on bank credit in Ho Chi Minh City in recent years is strong or weak with a certain lag. On that basis, practical solutions are proposed to help bank credit activities in Ho Chi Minh City grow stably and sustainably in the face of the impact of the real estate market growth cycle.

3. RESEARCH QUESTIONS:

– Is there any impact of real estate prices on bank credit in Ho Chi Minh City? If so, is this effect strong or weak?

– What is the impact of real estate prices on bank credit with lag?

4. SCOPE OF RESEARCH:

– Research object: bank credit activities and real estate prices in Ho Chi Minh City.

– Research scope: the impact of real estate prices on bank credit in HCMC. Data series from January 2009 to May 2012 in Ho Chi Minh City

5. RESEARCH METHODS:

– Research Methods:

  • Building a VAR model without worrying about determining which variables are endogenous and which are exogenous. All variables in the VAR are internal (sometimes purely exogenous variables are included in the model to account for trend and seasonal factors). The predictions made with this method are, in many cases, better than those obtained from more complex simultaneous equation models. In VAR modeling, the value of a variable is represented as a linear function of the past or lagged values ​​of that variable and all other variables in the model.
  • Firstly, the author conducts unit root test of each variable separately to determine the stationary property of the data series of observed variables; The most commonly used method for unit root testing is the Augmented Dickey-Fuller (ADF) method.
  • Second, the author proceeds to find the influence of the variables through the causal test model proposed by Granger (1969) to confirm the one-way effect of the variables.
  • Third, the author uses the push response function and the variance decomposition to determine the impact of real estate prices on bank credit.

Research data:

  • GDP, bank credit: secondary data are collected from Ho Chi Minh City Department of Statistics.
  • Lending rate: secondary data is collected from IMF.
  • Real estate price index: data source is collected from Vinaland Real Estate Company.

6. SCIENTIFIC AND PRACTICAL MEANINGS OF THE TOPIC:

– Test the impact of real estate prices on bank credit in HCMC

– Make an assessment of the impact of real estate prices on bank credit in Ho Chi Minh City.

– From the research results, practical solutions are proposed to help bank credit activities in Ho Chi Minh City grow stably and sustainably in the face of the impact of the real estate market growth cycle.

7. THESIS STRUCTURE :

The thesis is divided into 3 chapters with the following content:

– Chapter 1: Theoretical basis for the impact of real estate prices on bank credit

– Chapter 2: The impact of real estate prices on bank credit in Ho Chi Minh City

– Chapter 3: Recommendations for bank credit activities in HCMC to grow stably and sustainably in the face of the impact of the real estate market growth cycle

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