The undersupply of real estate products has awarded thick profits to investors over the past time. Boosting the market transparency in the midst of undersupply is becoming a hard job for authorities.
Dealing in all forms
The robust development of the property market in recent years has puzzled Vietnamese authorities because existing management mechanism is no longer appropriate while the new mechanism fails to keep up with to the rapid development, causing market distortions.
Mr Vu Xuan Thien, Vice Director of Housing and Real Estate Market Management Department, said: The development of the property market in recent years is “out of control” of authorities. This is one of main reasons for the sky-high, and climbing, price of real estate, especially houses. Although this market presently lacks transparency, it must be gradually clear in the future. Local fevers and uncontrollable land rush in the western part of Hanoi at the beginning of 2010 will not happen in 2011 and subsequent years.
The herd sentiment in real estate investment has brought the market to a different direction where land prices in many places stay little unchanged for a long time but they spiral up day after day, even hour after hour, in some other places. Speculation has made this market a playground for well-off people. According to Mr Thien, upcoming real estate investment must base on the real demand first. Only extremely rich people will invest in land plots lying far from the centre (the downtown of Hanoi) and wait for prices to go up. This has caused local fevers and worsened transparency shortage.
Mr Nguyen Huu Cuong, General Director of Cuong Phat Group Joint Stock Company, and President of Hanoi Real estate Club, said: It is extremely difficult to narrow the gap between the supply and demand because this largely depends on the supply. In Ho Chi Minh City - the largest city in Vietnam, the oversupply has caused real estate prices to go down as fewer people want to buy in the belief that prices will go down further. Even, buyers take no heed to projects without promotions for buyers or without attractive locations.
The situation is on the contrary in Hanoi because of undersupply and excessive demand. Thus, speculators are easily driving market prices. On the other hand, investors in the capital city always psychologically believe that prices will go up in the future. As a result, an apartment with a base price of VND18 million per square metre is offered for sale at VND40 million after one year. Indeed, owners do not actually know why prices go up such a high rate in a short time but they believe the price should be that.
Even, retail investors are willing to deposit money to buy apartments in unapproved projects. In the angle of economics, project developers will never turn down such a source of free money. To put an end to this illegal business conduct, the Government enacted the Decree 71 and Circular 16 to limit so-called capital contribution or sharing investment.
Transparent from the start
According to experts, to bring the real estate market to the right orbit of development, the improvement of market transparency is extremely important. But when the market is still undersupplied, many are still sceptical about the market transparency in the coming time.
Dr Nguyen Quang Tuyen, Head of Land Law Department, Hanoi Law University, said: The existence of a non-transparent real estate market is first and foremost caused by investors. Accordingly to the laws, real estate products must be bought and sold on trading floors. However, investors can easily circumvent the laws by signing capital sharing contracts and even by opening trading floors to legalise dealings. Thus, according to Mr Tuyen, to make the real estate market transparent, the State must be investors and must respect the transparency rules. Thus, transparency must be started from the process of approving projects and followed in other steps like execution, brokerage and offer for sales. Besides, to boost the transparency of the market, Vietnam must have official market forecasting channel to curtail emotional investments by retail investors.
The Decree 71 is an important factor to boost the transparency of the market but it reportedly distresses project investors because of complex procedures with State authorities.
In his remarks on this reaction, Mr Tong Van Nga, former Deputy Minister of Construction and Chairman of the Vietnam Real Estate Association, said: Each policy has two-side characteristics. On the one hand, it extricates existing shortcomings but it engenders new problems on the other. This is extremely normal because it is an expression of the development trend. Hence, it is very important to review the new ruling to identify obstacles to be dealt with. According to Mr Nga, administrative works with real estate authorities will reduce significantly when administrative procedures related to real estate will be reduced from 101 sets to 64-67. The simplification not only benefits companies but also helps the State reduce VND1,600 billion of expenses each year.
Luong Tuan
Vietnamese
