The property market has become gloomy since earlier this year leading to a series of enterprises on the edge of bankruptcy or selling projects to foreign investors. Debt balance in real estates also increases the risk of bad debts in the bank system if the market continues to fall. The Ministry of Finance has just taken some emergency measures to support the market.
Among solutions related to the real estate market, the Ministry of Finance suggests: It is necessary to complete the legal system applied to the real estate market, in which the financial policy should supplement and revise regulations that are restricting and negatively affecting the creation of supply and consumption of property commodity. Punishments should be stipulated to strengthen openness and transparency of market information, master plan of land usage, investment calling projects, strictly implement the compulsory regulations, in which organisations and individuals trading real estates must sell houses and transfer land usage right via the exchange.
The market hibernates
As from incomplete statistics of the Ministry of Finance, the real estate market in some big cities like Hochiminh City, Hanoi, and neighbouring areas tends to have lower price and transaction volume since the beginning of the year. Price of senior apartment has fallen considerably by 20 - 30 per cent. Price of floor land and villas is down by 30 per cent.
In practice, property price in Hochiminh City used to be exaggerated during the period of 2006 - 2007, now it plunged by 50 – 60 per cent. Many real estate companies fall into the dilemma as their investment mainly derives from bank loans. In the period of credit boom, real estate lending was seen to have low risk and be disbursed first. Real estate companies only needed 20 - 30 per cent of investment for project start-up, the project development based on bank loans and money from selling houses after finishing house foundation. When the loans were abruptly tightened, real estate lending was controlled by the administrators, the market slid, difficulties in selling houses pushed many enterprises into miserable situation.
In Vietnam, bubbles in housing price are the consequences of speculation, repeated trade, which does not originate from real housing demand. In many cases, people borrow bank loans for real estate speculation, especially apartments in urban centre projects. When the Government implemented the policy of credit contraction on real estates, many speculators let out their goods to take back investment, leading to upsoaring supply and falling price.
The speculative need has pushed companies to mainly build villas and luxurious apartments though this market segment only takes up 5 per cent of the housing market. When the market slides, it is price of these senior flats that drops the most rapidly. Meanwhile, apartments of small size and less than VND1 billion are the best-seller.
Housing price plunges too quickly but remains too high compared with income of the majority of the population. Houses of medium size and proper price are insufficient. The development of social houses for rent and hire-purchase as stipulated in the House Law is conducted slowly even in focal localities. According to the Ministry of Finance, the lack of cheap houses for rent deepens the imbalance of supply and demand in the real estate market.
Transparent information
The recent fever in the housing market is also a consequence of the unprofessionalism from the policy system to market participants. Land procedures, master plan contract, and project approval remain complicated and prolonged. Underground transactions, speculation, and unreal demand stimulation to raise price take place commonly, thus information about the real estate market fails to reflect the practice, increase trading risks. The infrastructure in Vietnam remains weak, especially the transport infrastructure, so housing development projects still concentrate on urban centres and reduce attraction and size of the market.
Openness of urban development master plans, housing and building development plans, housing and construction works transaction over the exchange as stipulated in laws is not seriously complied. The tax system related to real estate market remains inappropriate. Housing tax is set too low, unable to encourage efficient land usage and limit speculation.
The Ministry of Finance also proposed to completely improve administrative procedures applied to the real estate market in 2009. The Government should better the investment environment, properly solve the problem of interest between the State and land users, mobilise sources of fund from economic organisations of all international and local economic components to create property commodity.
As for tax policy, the Ministry of Finance suggested to impose progressive tax on holders of houses and land and exempt tax on households in difficulty, helping people and property right holders to invest in enterprises, even real estate companies.
According to the Ministry of Finance, to develop the housing market needs completion of the legal system, in which the financial policy will follow the direction: Fix current problems in policies which constraint the creation of property goods and transactions in the market; partly contribute to accelerating identification and granting of land usage right certificates, which is applied to all economic components to enrich the source of qualified real estate goods in the official market.
Fund subsidies for house buyers
Among solutions proposed by the Ministry of Finance, most noticeable is investment stimulation to meet the real housing demand. The Ministry also suggests providing people with loans to improve their houses.
The State Bank has recently stated that the situation of real estate debt balance of VND115,000 billion, or 9.15 per cent of total debt balance was not alarming. The State Bank Governor has instructed financial institutions to continue lending property projects, which are feasible, efficient, and able to pay debts on schedule. However, in practice, when the market is frozen, enterprises cannot sell houses, their credit rating falls, access to capital is impossible. Therefore, demand stimulation and healthy market to satisfy people's housing demand are issues to solve.
The Ministry of Finance suggests limiting projects in villas or senior apartments; encouraging investment in social welfare like education and training, public health or houses for low-income earners. It is necessary to speed up development of houses, which have size, quality and price appropriate to the majority of social demands.
At present, some housing companies have moved to the market segment of medium-valued houses, which is priced at VND400 – 600 million. The social house programme initiated by the Ministry of Construction will have an opportunity to warm up, but there is a lack of policies for the enterprises to feel their benefit when investing in these houses. When people can buy a house at high price, they are not interested in collecting rental. Meanwhile, incentives in land and loans are unclear.
Minh Chau
Vietnamese
