Data Collection Survey For Improvement Of Housing Finance

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This case study was consolidated in September 2016.

Project background

Since the integration and globalization took place, Vietnam had been witnessing a continually high growth. However, after several international agreements had been signed and took effect, large scale capital investment and capital expenditures (CAPEX) kept decreasing, which raised an obstacle for kicking up domestic consumption.

Housing was a fundamental need for living, but in Vietnam, the investment and consumption for housing was much lower compared to developed countries. Despite the development of the economy, urbanization, and population, Vietnam still faced a shortage of residence houses in both quantity and quality.

Besides the lack of high skilled and experienced construction companies, one of the biggest difficulties was the limited financial accessibility, which led to the deficiency in housing supply. Although the Government released the 30-trillion-VND package in the stimulus project to support people with low income to buy a house, it was still insufficient as a majority of house purchasers in Vietnam was financed by individual savings or money borrowed from family or relatives, while loans were rarely neither trusted nor approachable. While there was an old common sense that loans incurred high interest rate, difficulties in accessing housing loans from banks or financial institutions was another reason.

Seeing through those botte-necks, the Bank of Mitsubishi UFJ, in coordination with JICA and B&Company Vietnam, launched the survey to obtain the information for the enhancement of housing loan scheme which was essential for development of housing investment in Vietnam, and thereby to make suggestions to Vietnamese Government for necessary policies in the future.

 

Client: Japan International Cooperation Agency Vietnam Office (JICA), The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Type: Market Research, Consulting
Time: 2016
Status: Completed

Challenges

To thoroughly review the overall situation of housing, rental properties and real estate financing required a huge scale of researches, from studying legal framework, upcoming visions and policies, gathering information to comprehend current issues of housing market to conducting a mass survey to acquire necessary understanding regarding buyers’ demand and needs.

The survey conducted among consumers played a centric role in providing practical statistics for project consultants and advisors to catch the picture and build a proper forecast model. Therefore, it was crucial to prepare the most appropriate design for respondent selection and then implementation. Additionally, how to apply formulas to calculate and estimate the situation and future demand, hence provide the most relevant schemes to improve housing loans in Vietnam was another question. It also required a close coordination between the collection team and the analysis team to flexibly combine and swap among multiple sources and techniques to be able to build up the most insightful and reliable output in each segment.

Solutions

In order to gather sufficient information in various real estate related segments, the project team explicitly divided it into 2 main tasks, which were to conduct desk search about current regulations, conditions for housing loans and to carry out the mass survey among consumers to obtain people’s real demand for housing finance.

Initially, several desk researches on different topics were run separately and simultaneously, with the aim to dissecting the original questions through distinguishing angles of different stakeholders, including the government, home buyers, suppliers, financial institutions and the housing market itself. Therefrom, the project team would be able to establish a solid and entire landscape.

The consumer survey was combined of 2 methods, in which the sample for face-to-face street interview was 1,200 and for online survey was 2,000. To unify the design of the survey that was supposed to identify and break down financial needs of house purchasers, both offline and online collection targeted four same groups of respondents, based on their past experience of buying house, future demand and plan to buy a house and intention to mobilize money from bank loans. The content of the questionnaire was determined towards predefined models and in-depth analysis by specifying typical indicators, such as Loan to Value (LTV), monthly repayment ratio (MR)… Thanks to that, findings of desk research and survey were consolidated and assembled in forecast models.

That is to say, all formulas and models applied in calculation and estimation were carefully considered and picked up in prior to fieldwork implementation, so that they were compatible for analysis. In this project, many ideas from internal consultants and other experts were referred to in order to propose the most appropriate working models.

Results

After the data synthetization, processing and analysis, the project successfully extracted some concise but valuable key findings that could contribute to the enhancement of the Vietnam’s real estate industry in general and the rental housing and housing loans in particular.

  • Firstly, from reviewing current market situation, current legal environment and policies, the Vietnamese government had set a direction for developing a national strategy until 2030, in which housing finance policies were addressed until 2020. However, it required more sufficient instruction documents from related agencies, such as the State Bank of Vietnam (SBV), so that credit institutions could arrange actions to correspond to the nation’s visions.
  • From market’s viewpoint, demand for housing in Vietnam was high, regardless of different classes or incomes. It was estimated that by 2035, there would be a need of more than 100,000 housing units to absorb the demand of middle-aged and middle-income groups in Hanoi and Hochiminh City, which’d value of more than 150 trillion VND. However, limited capital remained one of the biggest issues. While bank loan services were still unable to earn trust among consumers, economic incapability might continue to drag down the actual consumption compared with the expected figures.
  • In the meantime, rental housing, leasing and low-cost properties were also facing troubles instead of providing an alternative source for residence. It came from the lack of government legislation and subsidies, insufficiencies in supplies’ quantity and quality. Despite all promotion efforts outlined by the authorities, it would take time to complete the whole system and put it into a practical, efficient implementation.
  • Upon collected data and information, the project team came up with initiatives for a new housing loan scheme, which proposed more active participation from government, financial institutions and other organizations. Firstly, it was important to build specific conditions for eligibility of houses and borrowers and expand the elaborate idea on the nationwide scale. Secondly, it urged the revoke of the government’s role in supporting house financing, by issuing more favorable regulations, adjusting financial instruments, creating long-term funds… Financial institutions like commercial banks were also called to engage more in the implementation, while foreign assistance, such as from JICA, was paramount in drawing low-interest ODA funds to the domestic market.