Conference talks up Recovery
Conference talks up Recovery
After four years struggling with difficulties, last year saw an improvement in the real estate market. Many challenges still remain but the market is opening up with many new opportunities for buyers, investors and developers.
Attendees at a seminar held by the Vietnam Real Estate Association last week in Ho Chi Minh City claimed there were substantial amounts of investment entering the market.
According to Deputy Minister of Construction Nguyen Tran Nam, the real estate market has been in clear recovery since last year, and there were several pointers to this being the case. Firstly, the number of transactions increased continuously in the last eight quarters. This helped drastically reduce housing inventories.
Secondly, Nam said, banking sector finance available to real estate had increased.
Thirdly, the stimulus package of VND30 trillion ($1.4 billion) experienced positive levels of disbursement. As of January this year, more than VND10 trillion ($476 million) had been disbursed. With the participation of 15 commercial banks and supportive regulations from the government, more than 12,000 people had received mortgages.
Nam added that to revitalize the real estate market, the State Bank of Vietnam was co-ordinating with ministries and bodies to implement another stimulus package valued at VND50 trillion ($2.38 billion). The new package would act as a subsidy to the commercial housing sector, rather than the previous package that centred on a much needed low-income housing segment.
“Apparently, the implementation of the new laws such as Real Estate Business and Housing laws from July 2015 and a range of other related regulations will help the market,” Nam confirmed.
A majority of the participants at the seminar believed the real estate market had made significant steps towards a recovery last year. But they also cautioned about being overly-optimistic.
Le Chi Hieu, general director of Thu Duc House Company said that the development of the Vietnamese real estate market depended much on the micro economy and government regulations.
‘The real estate sector received a lot of attention from the government last year, in addition to resolving large housing inventories, bad debt and the restructuring of the economy,’ Hieu said.
He also emphasised that many developers were to blame for the overly-large stockpiles seen in the past as they had not focused on market segments such as low-income owners that had huge demand for housing and instead had wasted finance on constructing supposedly luxury developments in which there was little interest.
“The real estate market is going to continue to be ruthlessly selective. Incapable developers who lack capital, management skills and behave unprofessionally will be purged,’ Hieu said.
Doctor Le Xuan Nghia said interest rates, the global oil price and foreign currency exchange rates will affect the real estate market.
“We still have to also be aware that the problem of bad debts remains and does affect the market, particularly when it comes to M&As,” Nghia said.
The development of the real estate market is also closely related to the credit market. The government has planned to issue a large number of mid and long term bonds. Meanwhile commercial banks now hold a large amount of government bonds, therefore if they want to increase their credit they have to release their government bonds. This would mean bank interest rates could increase because higher interest rates would have an impact on developers who had attempted to turn their businesses around after a long period of suffering losses, said Nghia.
“The government should be very careful and map out suitable solutions to ease interest rates down otherwise both the real estate market and the wider economy could suffer,’ Nghia said.
