Tactics needed to save real estate market

Tactics needed to save real estate market

The entire real estate market is pleading for help, but the question arises as to the kind of support that it needs right now. The answers depend on the effects of the current global scenario and world markets.

Illustrative photo.

Hold on markets

According to the Vietnam Real Estate Association, the real estate market contributed about 14% towards the GDP during the period 2019 until 2021. In theory, although real estate is not a manufacturing industry, it has pervasive powers over forty other economic sectors. Real estate helps to create a demand for building materials, especially iron, steel, bricks, sand, and cement and accounts for a large volume in transportation and logistics. Real estate directly affects the interior design industry and household appliances industry. It is also directly related to the credit and investment markets, which are important capital channels for corporate bonds, commercial banks, real estate investors, and homebuyers. It is also strong in the field of labor and social jobs.

Research results from the Vietnam Real Estate Association show that when the demand for real estate increases by VND 1,000 bln, it can stimulate production value of other related industries to increase by VND 772 bln and spread value worth VND 191 bln. Quantifying the scale of real estate assets over total assets of the economy in 2020 it accounts for about 20.8%. However, following the real estate market over the years, this field has always been in a state of transition, from hot to stagnant and vice versa.

However, three clear signs have emerged. First, there is a real estate supply and demand mismatch, which may not necessarily reflect the true situation of the industry. Second, the real estate investment and business environment is risky and lacks transparency. Third, the real estate bubble appears and creates a land fever which can distort the market. In particular, western real estate has both common and unique characteristics of emerging areas with many growth potentials, but also comes with many risks.

Market unresponsive

The Mekong Delta was the first place in the country to be approved by the Prime Minister for regional integrated planning, and to open up new development spaces and new urban areas. This was expected to attract investments for several infrastructure projects; post-pandemic revival of the tourism industry; forming of new agricultural product centers, as well as inter-provincial, sub-regional and inter-regional connections, to create golden opportunities for further real estate investments and businesses.

However, unlike the optimism shown in early 2022 about the rise of the real estate market, the southwest niche market is facing the most difficulties as real estate enterprises are exhausted and running out of capital, and the market is unresponsive. Although the area offers many advantages in product development such as tourism real estate, and ecological tourism in the river region, now activities are limited and investments slow in coming. The delay in site clearance and problems with planning, land, and construction procedures have also contributed to a slump in real estate investments and business projects.

According to the Can Tho Real Estate Association, Can Tho province, which is the central urban area of the Mekong Delta, has some projects that have been completed and built according to plan, although they are not yet eligible for sale because the land use fee has not been paid so far. Many Can Tho real estate enterprises have queued up to apply for land use fees, failing which they will have to bear higher interest rates.

Therefore, it is necessary to focus on the real estate market in the general context of the economy. Especially when there is a lack of liquidity, scarcity of capital, rising interest rates, and more priority given to curbing inflation. It is not possible to demand priority for this industry while ignoring other pressing social issues.

Right market segment

To be able to find solutions to resolve issues in the real estate market, it is necessary to pay attention to three basic factors. First, it is important to prioritize the right market segment to revive the market. Accordingly, it is better to choose the real estate segment for low-and middle-income segments of social housing, housing for civil servants, public employees, and workers. In the face of difficulties in accessing capital and credit from perspective investors and homebuyers, it will be easier to choose the affordable segment and more popular market size.

Hence there should be programs to support credit with policies, such as restructuring loans, expanding credit room by 2%, and allowing the use of deposits at state-owned banks to disburse funds to enterprises issuing short-term bonds payment. In addition, it is necessary to have incentive programs, preferential interest rates for tenants, rent-purchase real estate, and tourism real estate with potential for further development.

Second, focus must be on research and perfecting relevant legal institutions, especially the legal system on land, construction, Law on Housing, Law on Real Estate Business, and Law on Bidding. We need to increase opportunities and ensure access to land and real estate resources for investors and residents. In addition to urban real estate, housing, and commercial infrastructure, it is necessary to legalize other types of assets and real estate, to facilitate loans, mortgages, exchanges, and purchases in the real estate market. These are the types of assets invested on agricultural land to build farms, complexes, tourist attractions, and other infrastructure.

Third, there is need to ensure transparency of information and database of the entire real estate and housing market. By strengthening control over activities of real estate trading floors and brokerages, we can prevent market manipulation that cause land fever and distort the real estate market.

Báo Sài Gòn Đầu Tư