Opportunities Seen in Housing, Industrial and Tourism Segments

11:34:25 AM | 29/5/2019

The property and housing market has seen high growth prospects in 2019 given abundant capital, the involvement of more domestic and foreign investors. 2019 has also witnessed the qualifying phase where only reputable investors with quality projects can gain the market share.

At the 2019 Real Estate Forum themed “Real Estate Investment Trends in 2019” organized by the Vietnam Business Forum Newspaper, Mr. Nguyen Manh Khoi, Deputy Director of the Housing and Real Estate Market Management Department under the Ministry Construction, said that three prevailing types of real estate  include housing property, industrial property and tourism property.

Housing real estate has developed relatively rapidly in recent years. Hanoi saw sales opened for more than 10,700 apartments in 2015, more than 42,000 apartments in 2016, about 48,000 apartments in 2017, and more than 30,000 apartments in 2018. Ho Chi Minh City also witnessed about 2,700 apartments opened for sale in 2015, about 43,000 apartments in 2017 but over 27,000 apartments in 2018. This showed fluctuations in the real estate market.

According to statistics, social housing development has been still slow in recent years although the Government and the National Assembly have many timely policies. If compared to the national development strategy, the current social housing supply has met just about a third of the demand.

For tourism property, Khanh Hoa, Da Nang, Kien Giang, Phu Quoc and other places have witnessed the growth of second vacation homes. With this development, outstanding property loans have decreased significantly.

Also in the first four months of this year, tourism property sector grew well in tourism provinces. Meanwhile, property land also tended to increase in many localities but the supply did not meet the demand. In particular, low-end property was still fall short.

The imbalance was attributed to tightened credit sourced from the State Budget and banks. Property information still lacks transparency, such as unclear project location planning because incorrect information in the 4.0 era sometimes distorted the market. In addition, information about land rush was not promptly handled and administrative procedure reform failed to meet requirements.

However, investment opportunities in tourism and industrial properties remained high. Foreign investment in the first quarter of 2019 increased by 35% over the same period of 2018 or local investment attraction policies were very clear. Housing property still focused on low-end segment where up to 70% of the demand will need to be filled.

Despite being in a clear trend, the real estate market is currently in decline, said Mr. Nguyen Tran Nam, former Deputy Minister of Construction and Chairman of the Vietnam Real Estate Association. According to recent statistics in Ho Chi Minh City, construction permits fell by 16% and 150 projects were stopped for reconsideration.

According to an integrated report recently released by of the Vietnam Realtors Association, apartment and villa supplies in Hanoi and Ho Chi Minh City dropped to about 70% in the fourth quarter of 2018. However, successful deals increased, from just over 40,000 in 2014 to more than 80,000 in Hanoi and HCM City only in 2018.

“The strongest point of the Vietnamese real estate market is the huge demand and high liquidity. The United Nations statistics also showed that countries with the GDP per capita of US$1,000 - 10,000 tend to buy houses and Vietnam is in that range. In the medium and long term, the market will be very good and the urbanization will be further developed. According to calculations, about one million people move from rural areas to urban areas each year. People tend to save money to buy houses. It is important to supply this demand in a quality way,” he added.

In early 2019, the market showed signs of slowing down on fears of property bubble, he noted. The Government has thus taken steps to limit credits for real estate. According to experts, credits will be further tightened.

Especially, Circular 36/2014/TT-NHNN stipulated that banks can use only up to 40% of short-term capital for long-term loans within two years. From January 2019, this rate has decreased by 40%. In addition, the safety ratio for real estate loans increased from 150% to 250%. Hence, property credit growth has declined since late 2018 while the public demand for property has remained huge.

Mr. Nguyen Van Phung, Director of Large Enterprise Tax Administration Bureau, General Department of Taxation

In addition to incentives offered by tax laws, it is necessary to recommend, prevent and avoid transfer pricing and tax avoidance. Therefore, Decree 20/CP is designed to tackle these issues.

Tax preference is typical of carpet-rolling investment policies. So many tax incentives have been offered to investors by localities in the past years, including 4-year tax exemption and 15-20% tax reduction. Tax incentives are varied among localities. Investors can regulate profits through loans in each locality. For example, Phu Quoc Island of Kien Giang province offers very low tax rates to investors. Therefore, Decree 20 will help solve this.

According to Clause 3, Article 8 of Decree 20, interest expense calculated as tax expense shall not exceed 20% of the actual profit plus depreciation. Therefore, the regulation on loan-born profit is one of fair solutions for both cash-rich one and cash-short one when they are in the same market or do the same project. We need one million businesses that are treated equal and grow robust.

Mr. Can Van Luc, Chief Economist at the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV)

Currently, Vietnam has a lot of capital flows, and flows into the real estate market are relatively strong. Besides, the number of new real estate companies increases rapidly. Total registered capital is now about VND150 trillion (US$6.5 billion). Public investment is about VND244 trillion (US$10.5 billion). Last year, the foreign direct investment (FDI) sector invested US$6.5 billion in real estate last year. With this momentum, industrial property, commercial property and social housing property will increase this year.

Bank loans for real estate increased marginally, rising 5 - 6% in 2018. Total outstanding loans in the real estate field totaled VND510 trillion (US$21.9 billion), or 7% of total outstanding loans. In addition, lending to construction companies accounted for about 9% and loans for house purchase and repairing are made up 6.5%. Gross outstanding real estate credits accounted for 25%, a significant rate. Authorities necessarily itemize consumer credits because they are prone to potential risks.

The Government advocates issuing bonds to ensure non-monopoly, establishing the Real Estate Investment Fund and the Housing Savings Fund to build a housing property bank and re-mortgage loans.

The real estate market is not so gloomy and not pessimistic. Industrial property and housing property are still potential for development. Meanwhile, tourism property still lacks legal foundation for development while solution to this is not complicated.

Mr. Tran Kim Chung, Vice President of the Central Institute for Economic Management (CIEM)

The framework for real estate sector and real estate business is not simply decided by a specific agency but also by a group of agencies, including the Ministry of Finance, the Ministry of Justice and the State Bank of Vietnam (SBV). For that reason, we have established the Central Steering Committee for Housing Policy and Real Estate Market.

There will be three scenarios for the market. First, if the market keeps moving normally and nothing will happen, it will go slightly sideways down. Second, three real estate groups will be emerging, including industrial real estate, high-end real estate, and affordable housing for rent. Third, the world economy is volatile and Vietnam is affected while the macro economy is little changed the real estate market may face correction, possibly by the end of the year.

Therefore, I think that this year will see stable economic development and the real estate market does not have much, not weak, impetus.

 Quynh Chi