An analysis of housing credit program for urban hoausehold case study in HCMC Housing development bank(HDBANK)

UNIVERSITY OF ECONOMICS
HO
CHI MINH CITY
VIETNAM
INSTITUTE OF SOCIAL STUDIES
THE HAGUE
THE NETHERLANDS
=======oOo=======
VIETNAM- NETHERLANDS
PROGRAMME
FOR
M.A IN DEVELOPMENT ECONOMICS
AN ANALYSIS
OF
HOUSING CREDIT
PROGRAM
FOR
·
URBAN HOUSEHOLD
CASE STUDY
IN
HCMC
HOUSING DEVELOPMENT
BANK (HDBANK)
A THESIS PRESENTED
BY
DOHONGNGOC
BQ
GIAO
E>AO
Tl;\0

TRUONG
Dl;\1
H9C
KINH
TE
TP.HCM
THUVIEN
•
1
IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE
DEGREE
OF MASTER OF ARTS IN DEVELOPMENT ECONOMICS
SUPERVISOR
DR. TRAN TIEN KHAI
Ho Chi
Minh City,
February
2009
CERTIFICATION
"I
certify
that
the substance
of
this study has not already been submitted for any
degree and is not being currently submitted for any other degree.
I certify that to the best
of
my knowledge any help received in preparing this thesis,
and

all sources used, have been acknowledged in this dissertation."
Ho Chi Minh City, February 2009
Do
HongNgoc
i
ACKNOWLEDGEMENT
i would like to express deeply my appreciation and many thanks to the following
individuals and organization helped me to finish this thesis.
Doctor Tran Tien Khai, the academic supervisor who has spent much time to give me his
guides, comments, assistance in this research.
All
lecturer and staff
of
Viet Nam-Netherland master program which is helpful program
. for me
to
obtain the knowledge and the method
of
science studying with international
standard.
All
my classmates, especiaily my group have encouragement, cooperation and help
during my
stUdying and doing the thesis.
All
ofmy
family members have help and encouragement for me to try my best to finish
this research.
ii
ABSTRACT

VietNam
is going on the way
of
modernization, industrialization and especially
of
globalization with the purpose
of
economic development and enhancing the life standard
of
the resident. This implies· to· increase further with a rise in the urbanization levels and
in
the population along with increasing the demand for housing in urban
of
VietNam. To
. solve the
of
urban household, the government has many policies to support the
resident such as housing
finance system from bank or other financial institution, housing
program for low inconie : This study only concentrates to analysis housing credit
program from bank for urban household on two major aspects. The first is the
determinants
of
probability to get a housing loan. And the second is the determinants
of
housing loan amount.
SO
the household should improve their character and capacity to be
able to borrow housing loan from bank. Conversely, the bank also should have-suitable
. credit policy and condition for the customer to speed up effective and sustainable credit

development.
iii
TABLES
OF
CONTENTS
C
.·fi
. .
ertl
1cat1on.
1
Acknowledgement
: ii
Abstract iii
Contents :······· .iv
List
of
tables and figures viii
··Abbreviation ix
CHAPTER
I·:
INTRODUCTION .• · !
. .
1.1
Prob-em statement I
1.2 Objectives
ofihe
stlldy l
1.2.1 General objective 2
1.2.2 Specific objective 2

·
1.3
Research questions

·1.4
SuJi:J.macy
on
rese8.rch·
methQdology-
and data • 2
1.5
·The
organization
of
the
thCsis
CHAPTER
II:
LITERATURE REVIEW 4
2

1
TheOry
4
2.1.1 Major concepts 4
Household
Credit
Borrowing
Household credit market
2.1.2 Banking theory · 4

Credit management
Credit analysis and loan decision
. Issues in credit market
2.2'
Experiences
of
housing development in some Asian countries •• • •• ; 7
2.2.1
In
Singapore ; , 8
2.2.2
In
China , 9
2.2.3
In
Thailand
10
iv
2.2.4 In Korea
11
2.3 Theoretical models
and
empirical studies for house
demand

12
2.3.1 General observations
12
2.3.2 Determinants ofhousingloan
13

2.3.3.Determinants
of
loan amount
15
2.3.4 Theoretical models
16
The basic models
16
:The extended models ;
16
2.3
.5
Empirical models applied in previous studies 17
CHAPTER III: RESEARCH
METHODOLOGV
20
·
3·.1
AnalyticiJJ·
framework
3.1.1 Hypotheses , 20
3.1.2Detenninants
ofthe
probability 20
3,
1.3 Determinants
of
loan amount •
21
3.1·.4

Specific empirical models • 22
Model1
_ 22
Description
of
the model1 22
Definition and explanation
of
variables
of
the model 1 22
Expected signs
of
the variables' coefficients
23
Model2
24
Description
of
the model 2 , • ; 24
·Definition and explanation
of
variables
of
the
model2
24
Expected signs
of
the variables' coefficients

25
3.2 Data source· aild 26
3.2.1 Data source 26
Where is data source?
: 26
Wh
. .
•

d.
? 26
.
at-Is Its va I Ity _ .
When are they collected? 26
.
Population

: : ; 26
3.2.2 Sampling • 27
v
.sample size 27
Sampling method 27
3.3
Analysi-s
methods
3.3 .!Statistical tests for descriptive analysis 29
3.3 .2 Correlation analysis 29
3.3.3
Statistical tests for validity
of

specific models 30
. . . .
3.4
Analysis·
too1
_ 30
CHAPTER IV: AND DISCUSSION , 31
.
4.1
Situation
ofhousingcreditprogram
for
urban
household in Ho Chi Minh City
31
4.1.1 Housing demand
of
urban household :
31
4.1.2 National strategy
on
housing up to the year 2010
31
4.1.3 The overview
of
urban finaricial system, borrowing by urban households and
.housing finance project. 32
Financial system
and source
of

credit to urban households in
VietNam
32
Overview
ofborrowing
by
urban households 32 ·
4.1.4
HCMC
Housing development program 35
4.2
IiCMC Housing
D-evelopment
Bank
ofHDBank
35
4.2.2 Housing credit program
ofHDBank
38
4.3
HCMC
·aousing
D.eveloprri.ent
Bank
ofborrower'
characteristics .40
4.3.2 Correlation.analysis 44
4.3.3 Statistical tests for validity
of
specific models .47

4.3 .4 Description collecting data
and
choosing suitable method .48
·4.4
.Results ·of and explanation 49
4.4.1 ·:Empirical
result-
Model I ; 49
4.4.1.1 Enter method
; 49
4.4.1.2 Backward
LR
method : ;
;·
50
vi
4.4.1.3 Analysis the factor affect to the probability to get housing loan for
household
: 50
Empiricalresult-
Mod.el2 : 54
4.4.2.1 Enter method 54
4.4.2.2 Backward
LR
method 54
4.4.2.3 Analysis the factor affectto the probability to get housing loan for
household
, 54
CHAPTER V: CONCLUSION AND IMPLICATION 58
5.1

Conclusion on
the
applied methodology
and
limitation • • •.••.•.• • •• 58
5.2Conclusi0n
On
the
studie.d
results 58
5.3
Po.licy
in.
macro
levCI
• 59
5.4 Policy implication
for
HDBank
as well as housing credit
program
• • •• •• 59
References
Annex
vii
LIST
OF
TABLES .
Table 1.1: Compare mean
of

variable
Table 1.2: Correlation Matrix
Table
L3: Durbin:_ Watson in
model!
Tahie 1.4:
Durbin-
Watson in model 2
Table 1.5: Regression result
of
model 1 from step 1 to step 6 by back ward method
Table 1.6: Regression result
ofmodel2
froni stepl to step 6 by back ward method
LIST
OF
FIGURES
Figure 2.1: Structure ofprobability to get housing loan
Figure 2.2:
Structure
of
samples possibility to get a housing loan
Figure 2.3: Growth
oftotal
assets
and
chartered capital in HDBank
Figure
2.4: Growth
ofloan

outstanding debts in HDBank
Figure 2.5: Outstanding
ofhousing
credit program and total loan outstanding in
HDBank
Figure 2.6: Regression standardized residual
LIST
OF
ANNEXS:
Annex
1:
T-Test result
Annex
2:
The result
of
model
1-
Enter method
Annex3: The
resultofmodell-
Backward method
Annex
4:Theresult
ofniodel2-
Enter method
Annex
5:
The result
ofmodel2-

Backward method
viii
·ABBREVIATION
HDBank: Housing Development Bank
ADB:
Asian Development Bank
SBV: State Bank
of
VietNam
SOB: State Owned Bank
·
DLH: Department
of
Land and House
ix
CHAPTER
1:
INTRODUCTION
1.1 Problem statement
The world is flat on all fields by globalization, information technology development
especially
in
the economic field. Viet Nam also follows this tendency by joining
econoinic organizations
in area as well as
in
the world such
as
AFTA, WTO
Economic

development and reforms in the sector has brought increased urbanization.
Urban population is expected to increase further with a rise in the urbanization levels
and in the population. In a research
of
JBIC (1999) stated that
VietNam
has been
experiencing rapid urbanization owing
to
economic development after the Doi Moi
policy, and urban population is predicted to increase to 46 million in 2025 from
15
millionin 1995,
· Urban
development and housing sector, especially in Hanoi and HCMC, is urgently
challenged by swelling migration from rural· areas, expanding informal settlement,
emerging
.relocation needs by inner-city redevelopment, accelerating reform
of
SOEs
that provided their employees with houses. This implies demand for housing would
increase at a faster pace in urban VietNam in the short term to medium
_term.
To
solve urban development and housing problem for the resident, Viet Nam is
learning valuable lessons from other country's different models
of
housing
development. Vietnamese authorities clearly organized and exposed a particular plan
such

as
urban development policy, real estate institution, housing development and
housing finance With· housing finance, the authority specifies two aspects are
municipal housing fund and housing finance facility. In municipal housing fund,
respective
"Housing fundl' was establish in the early 1990's in HCMC and in 1998 in
Hanoi; These funds mobilized capitals primarily from the sales revenue
of
the former
state-owned houses, and
are
used for housing finance. Another facility named HIFU
was set up in HCMC in 1997. HIFU mobilizes capitals from bank loans, equity and
trust fund entrusted by the People's Committee, and it invests in urban development
including housing projects
of
the public developers. Besides that, housing loan
activities
are chiefly supplied by state-owned commercial bank, private joint-stock
bank, municipal fund

This study just concentrates to analyze housing finance especially housing credit
program for household. In real, a large
of
the urban population lacks access to
affordable
finance for housing construction or improvement, so they have to resort to
informal sources such
as
moneylenders, friends, relatives and credit associations

So
investigating the determinants
of
access to credit and the determinants
of
loan amount
1
help household and· bank have change to quickly find the common result.
It
means
that the household satisfy bank's·loan condition to get the housing loan and the bank
has housing creditto the customer safely and effectively.
Another further issue concerns this study is
the
housing finance project will set
up
a
facility to provide mortgages and loans for urban low-income and poor people to
improve their property or build or buy new homes.
It
will also promote institutional
strengthening and capacity building to develop VietNam's housing finance system.
1.2 Research objectives.
1.2.1
General objective
Analysis
of
housing credit program for urban households by analysis the
probability

of
credit for household and. the deteirninants
affeCt
to loaiiamomil
1.2.2 Specific objective
,
The demand
of
house and housing system in urban VietNam.

- The demand
of
housing loan
of
urban household.
-
The_
of
housing credit program for urban household including·
probability
of
credit and loan value.
- The research analyzes the relationship between urban households and credit
market to find
-out
relation
of
characteristics and endowment
of
urban

households and characteristics
of
loan to chance to borrow, loan amount.
"'
Enrich our knowledge on credit market and borrowing by household
in
Viet
Nam, particularly in housing credit program.
- The
effective
of
the housing finance project to the low-income and poor
··
people artd contribute
the
economic growth in VietNam.
- In addition, housing finance project do strengthen and capacity building to
develop VietNam's housing finance system.
1.3 Research Questions
_ How is the housing demand
of
urban household?
. What are the determinants
of
housing credit program for urban household?
How does the credit especially housing credit program contribute the economic
development and economic growth?
2
1.4 Summary on research methodology and data
The method is used, including statistical and descriptive analysis, review

of
historical
·trends,
and·.
comparative methods. Apart form, quantitative method is extensively
used;
Data
is used in the analysis from the core banking
of
HCMC Housing Development
Banlc
1.5 Strcuture
of
the thesis
The thesis consists
of
five chapters, following chapter
1,
the rest
of
the structure
as
follow:
. Chapter
2:
Literature review
Chapter 3: Research.methodology
Chapter
4:
Result arid discussion

Chapter
5:
·Conclusion and Implication
3
CHAPTER II: LITERATURE REVIEW
2.1
Theory background
·.
2.1.1 Major concepts
Household
is
area
of
concern in social science. Concept
of
household is defined and
discussed by economists, feminists and anthropologists. Ringen
(1991) defines
of
household that as is a group
of
at least two people pools their incomes and uses income
collectively

In house holds, income is not split up.between household members for each
to
use his or her · share, at least not all
of
it.
In large . measure, household members

cooperate on the use
of
income and thereby get more out
of
their income than they could
if
each had been on his or her own

However, there is much controversy over the
boundary
of
this definition. Generally, economists view household as an essential unit
of
analysis and develop theory based on modeling behavior
of
household. There are two
themes
of
model
of
household behavior. The first treats consumption and
produce separately or simultaneously in an integrated model. The second emphasizes on
market condition, and relationship between household and market for land, labor, and
credit.
Credit is the trade
of
money, goods or services at the present time for a payment in the
future. Credit can be provided
in
many different forms and under a wide variety

of

arrangements (Kinnon Scott, 2000)
Borrowing is one side
of
credit. In general, borrowing is defined as that to be transferred
property right on a given object (e.g. sum
of
money) in exchange for implementing
. obligation
of
a claim on specified object (e.g. a certain sum
of
money) at specified point
of
time in the future

In extension
of
this definition, borrowing
by
households,
particularly
Urban
household is defined
as
activities
of
households to obtain external
resources

to
support other household activities with obligation
to
repay in future. In other
way,
borrowing is made by household to finance household's budget deficit.
Housing credit market the presence
of
heterogeneity among different household induces
to situation whereby households fall into budget deficit while some others are in budget
. . .
surplus. Therefore, the deficit households desire to borrow in order to cover their deficit
while surplus households also desire to lend out for their interest. Consequently,
. household credit market is established to facilitate borrowing and lending
of
households.
Credit.
market function is to transfer purchasing power from surplus households
to
deficit
. .
. ones by issuing and acquiring
of
money-denominated debt.
. 2.1.2 Banking theory
Credit management: how to determine the creditworthiness?
4
In credit scoring method, the creditworthiness can be measured by the values basing on
the characteristics. However, there are some core factors that are usually used in credit
management (Kapoor, Dlabay, Hughes, 2001). They are:

the borrower's attitude toward his or her credit obligations.
Capacity: the borrower's financial ability to meet credit obligations.
Capital: the borrower's assets or net wealth.
Collateral: a valuable asset that is pledged to ensure loan payments.
Conditions: the general economic conditions that can affect a borrower's ability to
repay a loan.
· ·
Access to credit in this research can be understood as two components:
The probability to get credit from bank for household.
In case
of
the household can get the loan, the size
of
the loan is also one
compop.enf in access
to
credit.
Credit analysis and Loan decision
Purpose
of
credit analysis:
Credit analysis is a process
of
collecting information, analyzing information with
sciences method for the aim to understand clear about clients and their business projects,
serving process
of
short-term loan decision. Credit analysis is an important step with the
purpose using to
make

loan decision: accept or reject issuing credit. In order to make
credit decision banks must do three steps following:
Collecting sufficient
& accurate information.
Analyzing and processing data collected.
Predicting ability
of
repaying seed and interest
of
household.
By credit analysis, banks can replace their experiences about household and their project
applied for loan with scientifically argument and evidences rely on information and· data
processing. Therefore,· credit analysis
help banks avoiding two types
of
mistake: (1) give
credi(for
bad client, (2) and rejecting the good one.
Information using
for
credit
analysis
Collecting good information is. initial necessary when carry out credit analysis;
· quaiification
of
data analyzed have significant effected to result, by this, it is effected to
loan decision, the quality
of
data
is

noticed with three attributions: (1) sufficiency, (2)
timely, (3) accurately.
5
Analysis contents: analysis should be targeted evaluation
of
capacity repaying loan that
mean, it evaluate whether customer can repay seed money and interest or not.
To
·appreciate repayment capacity
of
company, we have to determined factors effecting
to
customer's repaying-debt capacity. In other hand, credit analysis contents should
be
concentrated into analyze factors effecting to ability to meet obligation. Basically, ability
of
repayingloan is influenced by:
Finance situation.
Practicability and effectiveness
of
projects.
Customer's attitude to refund debt.
Issues in credit market
. - . Chung (2000). Credit rationing is a condition
of
loan market in which the lender
supply
of
fund is less than borrower demand at the quoted contract term. In other
words, it means that there is excess demand. In credit market, credit rationing

appears to be
an
inefficient situation
of
credit market, where interest rate does not
work well
to
balance supply and demand sides.
There are two major ways to explore causes
of
credit rationing. Firstly, traditional
.
view:s
consider credit rationing resulted from government interventions on credit
market by imposing interest rate ceiling on lending institutions. Interest rate is
exogenously held under market clearing leveL With interest rate keep artificially
low, some poteritialborrowers who want to borrow are rationed. Secondly, after
. .

the demise
of
the traditional theories, a new approach to credit rationing was
developed. The new approach argued that permanent credit rationing is
considered as an equilibrium phenomenon rather than a temporary phenomenon.
. Modem theories identify problems
of
moral hazard and adverse selection in credit
market as a source
of
credit rationing when information is distributed

. asynimetrically among market participants.
Fragmentation
of
credit market strongly affects the borrowing· behaviors
of
urban
households. Fragmentation
of
credit market, firstly, is thought as a consequence
of
the repressive government policy. Ceiling rate on deposit and loan rate
imposed by central
bank induces to severe credit rationing in formal financial
sector. Resulting from inter-linkage between formal and informal financial
markets the.unsatisfied demand
of
households for formal loan flows into informal
financial sector and put demand for informal loans
to
rise up. Secondly, it is
viewed that fragmentation
of
household credit market is caused. by structural and
institutional features
of
credit market in developing countries. In addition,
fragmentation
of
credit market may also result from weakness in the infrastructure
6

that supports the financial system. Thirdly, another perspective on fragmentation
of
credit market argues that formal and informal financial sectors are parallel
developed because they serve different segments
of
credit market.
In conclusion, under perfect credit market, borrowing, along with saving, allows
urban households to maximize their utility overtime. Resources or endowments,
incomes, and activities
of
households determine the demand for loan. The effects
of
those factors on the demand
of
urban households for credit are called "demand
side effectsi'.
On
the other hand, credit market conditions and relationship
between urban households and financial intermediaries affect borrowing
by
urban
households.
If
credit market is inefficient; some
of
potential household borrowers
fail to access to credit market. Therefore, severity
of
credit rationing is an
explanation for credit constraint

of
urban households; and high fragmentation
of
credit market is an explanation for various borrowing behaviors
of
urban
households. Borrowing by urban households is substantially determined
by
condition
of
credit market so called "supply side effects". Thus, borrowing by
urban households is jointly affected by both demand and supply side factors.
2.2 Experiences
of
housing development in some Asian countries:
As
with Latin America and Africa, the number
of
urban residents is fast . expanding in
Asia. Asia is
also home to the largest concentration
of
poor people in the world
(Chapman et al, 1999; Montgomery et al, 2001). About a quarter
of
the total urban
population in Asia is living below the poverty line although the proportion may be higher
in
some countries. India and China· each holds about a third
of

the region's urban
population with many living in relative poverty. (Jacquemin, 1999).
Of
the
12
million
. .
people in Mumbai, for example, about 50 per cent lives in slums, dilapidated houses and
. on pavements.
In
the
extreme, they join the number
of
homeless people, estimated to be
in excess
of
100 million
in
the world (UNCHS, 1999). In one recent estimate, Asia alone
will need to Invest a sum
of
US$280 billion a year over the next 30 years to meet the
basic needs
·
of
the population in housing and other urban sectors (Brockman and
Williams, 1998).
· lack
of
housing access is one

of
the most serious and widespread consequences and
causes .
of
poverty ili Asian cities. The· improvements in housing that are important to
improving the quality
of
life ·among the poor often does not receive the attention they
· deserve from policy makers (Daniere, 1996). To make any appreciable improvement,
substantial
government spending is needed, both in the physical expansion
of
the city's
infrastructure and implementation
of
poverty alleviation programs. Buttressed by the
. heritage
of
literature that argues the importance
of
affordable and improved housing in
7
· urban poverty reduction (see, for example, Mitlin, 2001), the immediate research issue
is
how poor families can access urban shelter more affordably. ·
Experience for
VietNam
from other countries in Asian as follow:
2.2.1
In Singapore

.
The
Singapore public housing development has attracted keen research interest (see, for
example, Wong and Yeh, 1985; Yuen et al, 1999) but few have clarified the public
housing-urban poverty nexus. This provides the starting point for the present analysis
of
the performance
of
housing development.
· Follow by Global urban development magazine in Singapore (GUDS, 11/2007), in a
fundamental perspective, without parallel economic development, the housing
improvements would not have advanced so dramatically. Deliberate action was taken to
. diversify the economy and provide employment in Singapore. With economic growth, the
nominal household income had increased. Real GDP had grown at an average
of
8.6%
per year over the 30-year period from 1965 to 1999. This had fuelled growth in real per
capita GDP from S$4000 in 1965
to
S$32,000 in 1999 (while inflation remained low,
around 2 to 3% per year).
At
the household level, the average monthly household income
increased. As
Ng
and Yap (2001} illustrated, from 1988 to 1998, average monthly
household income. had increased by
6.
7% per year, leading to higher asset ownership.
The proportion

of
homeownership public flats expanded from 26 per cent in 1970 to
92
per
cent ofthe housirig stock by 1999.
Although the financing
of
public housing draws from the general background
of
the
country's economic progress,· Singapore's experience also demonstrates the employment-
generation potential
of
this sector. By 2000, the HDB (Housing Development Board
of
· Singapore was established in the beginning
of
year 1960) in providing a total housing
environment
forallwho
lack has initiated the construction
of
more than 850,000 dwelling
units, 19,500 commercial premises, 12,800 industrial premises, more than 1460 schools
and community facilities,
45
parks, 17;347 markets/hawker centers, and numerous car
parks. The construction
of
these facilities while providing improved housing and better

quality
of
life for the poor has created construction jobs and has· a high multiplier effect.
Reflecting on the economic impact, some housing scholars such as Sandilands (1992)
have described the construction sector as a leading sector since its growth rates are above
the rate
of
growth
of
overall GDP. Others have written about the pump priming effect
of
public sector housing construction (see Krause et al, 1987).
As with many other cities, Singapore's quest to provide its poor residents with good
living environment is not new. Adequate shelter with the promise
of
a decent life
of
dignity, good health, safety, happiness and hope is one theme that has been repeated
internationally and enshrined in successive United Nations declarations (see, for example,
8
UNCHS, 1998; 1999; World Bank, 1993). The Singapore development expenence,
however; shows thatpublic housing
(even:
high-rise) for the lower income families need
not degenerate irito polarized and marginal environments. Nonetheless, the reemergence
of
the homeless underscores the urgency for further research. In particular, the trend
towards taller housing presents challenges The poor
of
Singapore do not have the

alternative to opt out
of
this housing. In this regard,
we
are reminded
of
Mitlin's (2001,
p512) exhortation to understand and follow the realities
of
the poor in the continuing
effort to create affordable housing that seek to address their diverse needs.
In
sumrilary, Singapore's system
of
housing development with a single empowered
authority responsible for housing delivery may not
be
the model for all countries, but
effective pragmatic management principles (such
as
inclusive housing and widening
homeownership opportunity for lower-income families, directed assistance for low-
income· renter households and continual review
of
housing access) apply in most
contexts. There is a growing literature that emphasizes a comprehensive approach
to
housing. Similar
to
situation

of
China and Thailand or other Asian countries, VietNam
can get the most suitable lessons for housing market and policy in the way
of
economic
development.
. 2.2.2 In China
China's housing
market and policy context are relatively unique, differing from those
of
the urope and the US, including the post-Communist countries (Wang and Murie 1999,
·Naughton 1994). This section therefore review China's homeownership-oriented housing
polices. In this section and throughout the paper the discussion focuses on urban housing
·policy
olily be.cause.
of
the different rules and institutional arrangement governing
. housing hi rural and urban areas.
. Privatization
As economic· reforms deepened in the 1990s China's policymakers sought to privatize
much
of
the publicly-owned housing stock that had been previously rented from the state
or state-owned enterprises
(SOEs). In doing so the government was motivated
by
a
number
of
factors, foremost

of
which was the fact that maintenance cost levels ran well
above the nominal rents paid by tenants; Zhang
(2003) cites figures indicating that
as
of
.1991
rent on government-owned housing averaged 0.13 ¥/m2
of
living space (enterprise-
owned
housing was even cheaper) while upkeep expenses averaged 2.31 ¥/m2. Under
·these conditions housing costs accounted for only 1 percent
of
the average worker's
earnings.
Inl994
the Housing Reform Steering Group
of
the State Council unveiled several
9
reforms designed to encourage the development
of
housing markets. Liu, Park, and
Zheng's
(2002) analysis
of
the relationship between housing investment and economic
growth found significant positive relationships over both the short and long runs: another
important policy motivation for spurring development

of
housing markets.
Housing Provident
Fund
The Housing Provident Fund (HPF) was designed in 1992
to
help wean employees from
workplace housing provision. As such, it was paired with reform
of
the salary system.
Instead
of
providing housing directly and paying employees a correspondingly lower
. salary, the progranfs goal was to enlist public sector employees in the development
of
the coriunercialliousing market by raising their incomes but siphoning the increase into
savings accounts dedicated to
while reducing their in-kind housing benefit,
thereby encouraging
them to find housing in the marketplace (Wang 2001). The reform
was part
of
a more general effort to have individuals and markets replace government and
. work units as the entities responsible for housing finance (Lee 2000). Because employer
participation is not mandatory in the private sector, the primary HPF beneficiaries are
government, party,
SOE, and other public sector workers, although some private firms
and foreign joint ventures also match employee
contributions.
In a recent overview

of
China's housing policy, Sun (2004) criticizes the targeting
of
the
HPF system. This is. reinforced by the fact that even most working lower-income
households are not in the kind
of
official, full-time, and typically public sector positions
likely to carry an HPF benefit. ·
Affordable Housing
The other principal homeownership-oriented public policy is the development
of
'affordable housing' (Jingji Shiyong Fang or 'economic and comfortable housing'). The
policy is designed for lower-middle- and middle-income urban residents and involves
· government subsidies and profit caps for developers.
2.2.3 In Thailand
. In May 2005, Veerachai Veerametheekul, Vice Minister
of
Finance, Khan Prachuabmob,
President
of·
Government Housing Bank, Pomsak Boonyodom, National Housing
Authority Governor; Kitti Pattanapongpiboon, President
of
Housing Loan Association
and Ballobh K.rittayanawat
of
the Government Housing Bank, represented Thailand at the
"More Than Shelter: Housing as an Instrument
of

Economic and Social Development",
an international conference organized by Harvard University's Joint Center for Housing
Studies (JCHS) in Bellagio, Italy. Important leaders from four other countries, including
· the USA, Mexico, South Africa and :kenya also attended the conference. After the
conference, the participants from five countries endorsed the "Bellagio Housing
10
Declaration" affirming that sound, sanitary and affordable housing for everyone is central
to the well-being
of
nations. It also reaffirmed that housing is more than shelter; it is a
powerful engine that creates opportunity and economic growth. Several other principles
. were also promulgated:
(a) Housing as a sustained national priority: Housing is a
long.; term process that requires
a stable policy framework and national priority attention.
(b) Housing as an engine
of
social and economic development: Housing · brings
significant benefits in terms
of
employment creation, domestic capital mobilization and
social wellbeing in the face.
of
the major challenges posed by.population growth and
urbanization. (See seminar details and Bellagio Housing Declaration in GHB Newsletter,
41st edition, 2005) The conclusions from this most important conference indicated that
many countries recognized that housing is more than shelter. It is one
of
life's essentials
and a process

or
engine
of
economic and social development. The Government should
give a high :priorityfor establishing a long-term housing policy and strategy

2.2.4 In Korea
. .
.
In
1962, Korea Nation Housing Corporation (KNHC) was established with the mission
of
improving the public living standards and welfare through · housing construction and
urban redevelopment.
KNHC is a 100 percent state-owned· company. Due to its strong links with the
government, it has been provided direct funding assistance by the government in the form
.
of
equity contributions and loans from the National Housing Fund.
· KNHC's organization consists
of
Main Office with 20 Divisions under 4 Head Divisions
and 1 Research Institute, 2 Regional Head Divisions in Seoul and Gyeonggi,and
10
Branch Offices in other major cities .
A total
of
3,076 ·employees is working at KNHC, including 7 executives, 844
administrative officials (27%),
1,721

engineering officials (56%) and 504 researchers and
clerks (17%) .
.As
of
the
end
of
2001, assets
amol:mt
to 14,374 billion won, liabilities to 9,301 billion
won, capital to
5,073 billion won. Its sales are up to 3,274 billion won.
However, the liabilities, the accrued interest
of
which should be paid by KNHC, are only
2,254 billion
won
oftotal9,301
billion won.
Temmts
andhousing buyers will pay the interest expenses
of
the rest (7,047 billion won)
.which chiefly comes.from National Housing Funds.
The National Corporation Realizing
Urban Development and Housing Welfare Korea
National Housing Corporation (KNHC) has focused on the massive construction
of
11
housing unit for national housing stabilization uritil now,

but
will begin to lay strong
emphasis on
the improvement
of
quality to comply with the change
of
life from now.
KNHC will be reborn as a future-oriented corporation with higher additive value to
realize urban development and housing welfare.
· Moody's said ·such a track record
of
government assistance and the possibility that
government will continue to provide financial help ensures KNHC's financial viability
and operational soundness. (website
of
GOLIATH -Business knowledge on demand).
Any future changes in rating would occur
if
the country's sovereign rating is changed, it
said.· Downward pressure tnay occur
if
the government's fiscal condition weakens, or
if
the corporation is privatized.
Rival ratings agency·
Standard & Poors (S&P) also gave the corporation a foreign-
. currency credit rating
of
"A minus" and a domestic-currency rating

of
"A." S&P's outlook
for the corporation's credit rating is
"stable."
The credit rating reflects the corporation's firm status in the South Korean housing market
. and its housing projects for the country's low-income people.
· 2.3 Theoretical models and empirical literature for housing demand
.
2.3.1
General observations
Housing loan for household·
seem to be available in many countries; including at least
Finland, UK, Japan, Spain, Portugal, Italy, France, Norway, Sweden, US, Australia,
Germany, Belgium,
thailand,
Philippines; This applies especially well to contributions
that consider indebtedness as a problem.
It
seems to be particularly difficult
to
find
simulation based analyses on household debt. Instead, descriptive analyses seem to be
more commonplace. There are a
few theoretical contributions on household debt. The
permanent income hypothesis, presented by Milton Friedman in 1957, states that people
base consumption
on
what they consider their 'normal' income even though their
incomes may vary considerably in the short term.
may create occasional needs to

incur loan. The life cycle approach is
. somewhat similar to the permanent income
hypothesis, but it
emphasizes the impact ofchanges in wealth on consumption. Neither
of
· these approaches focuses on problems related to indebtedness
of
household. This part
focuses on determinant
of
housing loan and loan amount caused by household
indebtedness.·
Before going to
the
literature
of
housing loan and loan amount, reviewing some literature
of
housing . demand and housing credit in some countries help know deeply below
literatures.
12
Firstly, there are some theories mentioned the housing demand
of
household. Housing
demand reflects the household's simultaneous choice
of
neighborhood, whether to own or
rent the dwelling, and
the
quantity

of
housing services demanded. Existing literature with
using a sample ofTampa, Florida household was showed by Carol Rapaport as follows:
Vij
= V(PHj,tj,PX,Yi,Xi,Zj,ij) .
where P is the price
of
a unit
of
housing services in community/tenure choice
j,
t is the
· statutory Hj j property tax rate, P the price
of
the composite good that is the numeric, Y
is
income, X is a vector
of
household characteristics that are independent
of
the choice
of
ccirn.inunity/tenure, Z is a j vector
of
local public goods and other community
·characteristics, and contains unobservable
ij
characteristics that vary across households
and communities.
Household income and the price

of
the composite commodity are exogenous. The price
of
housing reflects the supply price
of
housing and any capitalization
of
the community
mix
of
public services and tax levels.
Pis
constant across all in any given
j,
but differs
across Hj jurisdictionsand across tenure status.
Clus and Ralph
(2007) also had research
of
housing demand. Beyond money, monetary
policy and financial. developments housing markets are certainly also influenced by other
factors, such
as taxes, demographics and other developments determining the demand for
· housing. This research also stated the relations between housing loan and housing
demand. Marco Salvi
(2007) also presented the model for the demand
of
housing in the
Greater Zurich area. Besides that, there are just few empirical
of

housing demand such
as
Bajari and Kahn (2002); Ferreira (2004); Bayer, Me Millan, Ruben (2002). All these
papers expose analysis concerned to housing demand. These literatures
of
housing
demand prove that housing demand is always burning issue in many countries in the
world.
2.32 Determinants
of
housing loan
There seem to be· hardly ·any theories on determinants
of
housing loan for household.
Instead, there
are numerous empirical analyses on households' debt servicing difficulties.
May and· Tudela (2005) used British data to study which factors determined the
likelihood
of
. having debt servicing difficulties. · Unemployment, high levels
of
indebtedness and a high proportion
of
non-collateral debt increased the likelihood
of
problems. Difficulties seemed
to
be
of
permanent nature; paSt problems were a good

predictor offuture problems.
There was almost no evidence
of
housing wealth preventing
difficulties. This might be due to the possibility that many interviewees considered
themselves to be in difficulties
if
the time schedule
of
repayments had been renegotiated
with the
bank
A typical household is certainly unwilling to sell the dwelling in order to
13
· service loans. Hence, the availability
of
collateral
is
of
limited use in preventing reported
difficulties, even though collateral certainly reduces banks' credit risks.
May and Tudela introduce a new
conCeP,t,
namely 'debt-at-risk', an indicator
of
credit
risk.
It
is simply the sum
of

household level housing debt multiplied by the household
. · level likelihood
of
financial distress.
If
it
is
possible to identify the determinants
of
the
likelihood.
of
distress, and
if
micro level data are available, it
is
possible to calculate the
·

aggregate amoimt
of
'debt
at risk' and how it would react to changes in the parameters,
such· as income,. age, house value,· house size, etc. The sections after
of
this paper apply
this concept.
Lh.t
and Lee (1997) used various methods to study the determinants
of

housing loan
defaults in Taiwan. Several factors, including the loan-to-value ratio and the level
of
education, seemed to contribute to the occurrence
of
problems. Problems were
·
··
particularly commonplace among the youngest.
.Bowie-Cairns and Pryce
(2005) found with British data that household debt servicing
ability
was an increasing function in the level
of
education, age and married status.
Families with many children were more likely
to
have problems. Geographic factors
to
play some role. Partially, Bowie-Cairns and Pryce mention some major
characters effect
to
the
loan
payment as follow:
. Number
of
children in a household
and
payment difficulties

An increase in the number
of
children
in
a household is associated with higher outgoings
and less available
finances to repay debt.
It
is worth exploring their experience
of
maintaining payments. However, within each year comparison between households with
different numbers
of
children confirms that, in most cases, as the number
of
children
increases the rate
of
repayment difficulty and arrears increases.
Annual household income
and
mortgage payment difficulties
One
would expect that household income would have a strong relationship with the
probability
of
household experiencing mortgage arrears .
. Age
and
mortgage repayment difficulties

In general, one would expect that as an individual gets older, their status, income and
. financial stability will also increase.
. . .
Similar to the case in HDBank; the expected result likes result
of
Bowie-Cairns and
Pryce. The result ofregressimi
of
this research will be shown details in chapter
IV.
As
to
loans with no collateral, Del-Rio and Young (2005b) concluded that high levels
of
debt and factors related to married status and ethnicity were relevant to the occurrence
of
problems among British households.
14
In
these researches, major variables strongly effect to the probability
of
housing loan
which are income, age, sex, house value, house size, principal, residential status,
occupation, interest, marital status, credit type, etc. In real condition
of
Viet Nam and
ability to get the data, the author will choose some variables in the model as sex, age,
education, income, size, house value, maturity, collaterals and loan amount for the
probability to get a housing loan. Banks in Viet Nam usually have housing credit with
common conditions as principal, income, interest, maturity. But in situation

of
economic
developing and pressure
of
joining the world economic, commercial bank in Viet Nam
should has more credit program especially housing credit as mentioning with flexible and
diversified condition for many objectives. This research builds a model with many
variables to get meaning . variables and main variables have deeply effect
to
the
probability to get a housing loan. From the result
of
this research, commercial bank will
has more housing credit program based on characteristic
of
the b()rrower_in order
to
undertake effectively and successfully.
2.3
.3
Determinants
of
housing loan amount
There
seem
to
be some empirical regularity that has been corroborated by observations
ina:de
in many different countries.
Del-Rio

and Young (2005a) concluded that non-collateral loans in Britain were typically
taken
by
people who were in their twenties, had
no
children, were relatively well
educated, were employed and had optimistic expectations.
BroW11,
Garino, Taylor and Price (2003) found that optimism seemed to strengthen the
demand for rion-collateralloans,.even though after a certain level the degree
of
optimism
had
no
impact Factors such as spouse income and savings seemed to have no impact.
Riiser and Vatne {2006) presented observations on Norwegian data from 1986-2003.
Household debt had been. on increase, especially among the youngest households
artd
. those with low income. The growth
of
financial wealth had taken place above all in
households with
no debt.
·Magri
(2002) studied the occurrence
of
debt among Italian households. Higher income
strengthen both
the
·demand for loans and the availability

of
credit, whereas being an
entrepreneur strengthened the demand for credit but made it more difficult
to
obtain
loans.
Brown and Taylor
(2005) studied the determination
of
household financial wealth and
debt in the UK, Germany and the US. There was a clear correlation between financial
wealth and debt.
If
households with no debt were excluded, the correlation vanished.
Tudela and Young
(2005) analyze the detetminants
of
household balance-sheet in the
UK, applying the hypothesis that· households optimize their income and consumption
15