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News Release

Ho Chi Minh City

JLL’s point of view about the Circular 36

Recently, attending an interview, Stephen Wyatt - Country Head of JLL Vietnam gave his opinion about the draft release for Circular 36


We have recently seen a draft realesed for circular 36 by the Government which will undoubtedly have impact on real estate market if it is implemented.

I think the key thing is that we really need to look at here is what the implication of this draft 36 will have. The implication is because they want to reduce lending in the market and reduce the amount of credit that has been released in the market in the coming year 2016. 2015 we saw a big increase in lending over the course of the year up to 18-20% and this is really an implementation to try and bring that under control and maybe reduce the lending going forward.

In theory that's a good idea as we have seen a lot of credit coming into the market. But our view on this draft degree is that rather than applying it across the board, across all lending, it should be on a case-by-case basis.

If it is a developer or an individual, you look at their credit rating themselves and how it has done in other countries around the world. If the developer is highly leveraged, they already have a lot of debt then obviously the level of debt or the level of credit should be lower. But if there are developers with very good track record, then there is no reason why they cannot be continued to lend to those developers or people. Therefore, I think it should be on case-by-case basis rather than across the board.

We feel that we are in a very early stage of a market recovery. We only really saw the real estate market starting to improve maybe in the middle of 2014 and certainly improved quite dramatically in 2015. So we are still in the early stage of the property market and we had a number of years of very soft market conditions, it is a little bit early to start implementing cooling measures as we may be seeing in Singapore or maybe in Hong Kong because those markets all did become very overheated and the government and the state bank had to implement sort of cooling measures.

Although it is early stage, at the same time we also would rather than seeing big bubble in the property market, we would prefer to see a steady increase in property market a more sustainable increase and ensure that we do not see the types of bubbles that we saw in the previous cycles.

So again I think if there is a slight cooling measure to slow some of the credit, I do not think it is a bad thing, I think it will help to sustain, prolong and increase property cycle.

The main parts of circular 36 is all about trying to reduce the risk of a property bubble and reduce risk of increased overextending by certain companies and individuals, so I think there is nothing in particular that we would really draw out from the circular 36. I think, for us we feel it is more on a case-by-case basis and each company or developer or investor that the way it should be addressed rather than trying to issue a complete blanket sort of degree across all sector.

If we do not see circular 36 come into fruition and it is not implemented, we will continue to see a development activity and increase in the real estate market continuing as it is. What we always advise inverstors or developers in real estate or individuals who are looking at buying the property, you need to be aware of your own financial situation and make sure that you are not overextending yourself and taking on more debt than you think you can actually pay and not really betting on the market improving all the time. What we have learnt from Vietnam is the property market are much shoter than other developed countries. The cycle, then, tend to be two, three, four, five year so you need to be prepared and a little bit conservative when you are taking on debt and taking on more lending.

The overall message is that if there is no change to the current lending provisions, we just advice our clients to be a little bit more aware of market conditions and really understand the market before taking on a big liabilities.