Markets & Prices
Last updated: Tuesday, May 21, 2013
Real Estate Market in 2012: Opportunities in CrisisPosted: Monday, May 07, 2012
The prolonged real estate recession distresses most developers and investors. Selling prices of real estate products are somewhere at the bottom. Primary investors want to sell as soon as possible but buyers keep watching for lower prices. The drawn out gridlock between sellers and buyers sent the market to the state of freeze. However, according to many experts, this is an opportunity for businesses and investors to restructure business operations, review business objectives and strategies to approach the market in a more flexible manner.
Troubles and difficulties
At the Conference on "Real Estate Market 2012 - Opportunity in Crisis" held by the Business Forum Newspaper, Mr Nguyen Trong Ninh, Deputy Director of Housing and Real Estate Market Management Department under the Ministry of Construction, said: The property market still has six problems to be solved before thinking of a recovery. The biggest matter is institution, policy and legal documents. He said Vietnam has about 10 laws related to real estate market. In previous years, the property market developed strongly but the development is disassociated with specific strategies and plans, leading to serious imbalance in supply and demand. Besides, the credit system was not strong enough to fund medium and long-term development objectives.
Dr Can Van Luc, senior advisor to the Board of Directors of the Vietnam Bank for Investment and Development (BIDV), said that although the economy had optimistic developments in the first quarter of 2012, it is exposing difficulties and challenges such as production stagnation, lowest GDP growth in three years, steeping domestic purchasing power, and growing inventories, especially building materials. The business environment is also worsening in the eyes of foreign investors. The economic difficulty is also clearly reflected by the performance of property market when 350 trading floors were almost vacant in the past months. Property prices in all segments continue to fall down, secondary investors withdrew and capital shortage forced many real estate projects to come to a halt or delay construction process.
Dr Luc said enterprises’ inaccessibility to bank loans had a huge impact on the market. According to a recent survey on small and medium-sized businesses by Asia Commercial Bank (ACB), about 30 percent of businesses are disqualified for bank loans primarily because they fail to prove financial information transparency, lack orientations and capability to work out long-term business strategies, employ family-styled arbitrary management, and lack disciplines in financial commitment and cash flow management.
Mr Phan Thanh Mai, General Secretary of the Vietnam National Real Estate Association, looked at difficulties facing real estate business in other direction. Standards of revenues and profits employed by real estate businesses are problematic, resulting to difficulties for banks to analyse cash flows and project viability when they consider new loans.
Meanwhile, listed companies, with their right accounting standards, are seeing great opportunities.
Thus, corporate governance and financial risk management need to be strengthened by real estate businesses. They need to be deeply trained of accounting standards.
Opportunities for market recovery
Remarking on opportunities on the property market in the second quarter of 2012, Mr Phan Thanh Mai said businesses will see more advantages thanks to economic stimulus measures. This is the basis for the market recovery. Besides, the scheme for development of housing development savings fund and housing lending savings fund submitted to the Prime Minister in April is expected to leverage the market. In addition, such measures and models as re-mortgaging are also effective channels to mobilise capital, increase supply and deal with current capital shortages.
Mr Mai added that, basing on the development cycle of property market, after 3-4 years of recession (since 2007 - 2008), the property market may enter a new growth cycle. Macroeconomic performances are improving and stabilising. This will help the real estate market to develop.
To resolve difficulties facing the property market, the State Bank of Vietnam (SBV) officially lowered deposit rate ceiling twice in a month to 12 percent per annum on April 11. This is the groundwork for lending rates to fall down. Besides, banks have expanded credits for many sectors.
Mr Ninh of the Ministry of Construction said the Prime Minister issued Directive 2196/CT-TTG on strengthening management and developing real estate market and Decision 2127/QD-TTg approving the housing development strategy to 2020, with vision towards 2030, in order to direct housing development in the coming time. Accordingly, from 2013 - 2014, the Ministry of Construction will continue to build and complete the Urban Law, and amend the Construction Law, the Housing Law and the Law on Real Estate Business. The ministry will review investment projects to increase the construction of smaller houses.