Vietnam Real Estate Market in 2012: Trial Period!

This was the statement of Mr Tran Kim Chung of the Central Institute for Economic Management at the workshop “Comprehensive Solutions for Real Estate Market in 2012” recently organised in Hanoi by Vietnam National Real Estate Association.

According to Mr Chung, 2012 is the testing period for real estate market to screen real estate enterprises. It will also be a new development period for “financialization” of the real estate market.

 

It was supposed by Mr Tran Kim Chung that at present, real estate market is noteworthy but paid little attention. There are many reasons, in which the most direct one is there’s no money flow into the real estate market, because of the overexpansion in market size, especially Hanoi and Ho Chi Minh City.

 

According to estimation of the Agency of Housing and Real Estate Market – Ministry of Construction, the real estate market is facing many difficulties, especially in terms of capital. In addition, weak transaction, delay in production of enterprises, tightened credit etc influence the status of real estate market. In near future, it will continue to cope with many challenges.

 

At the workshop, Mr Tran Kim Chung raised 3 possible scenarios for real estate market in 2012. The first was brighter market, which is the least likely but the most desired scenario. The condition for this was a stable world economy, the countries using euro overcoming public debt crisis, appearance of some real estate financial tools such as: Real estate Investment Trust, Mutual Fund, etc. Then the market would escape from the plateau and become brighter in lunar August. The period from March to September 2012 will be the essay to screen real estate businesses. A new development period for finalization of real estate market would begin.

In the second scenario, nothing in the first one would happen. Real estate enterprises would fall into big troubles in the context of seriously declining market. There might be a bad wave, in which projects would continue to see delays and frozen works. Mr Chung said that, if this scenario comes true, secondary investors will leave real estate market and it will take a rather long time to recover.

 

The third one is the market would stay still as now. Policies would be under consideration while enterprises would proceed with their present operation, investors would hold on to their hope and some would narrow their production.

 

On the other hand, according to Dr Vo Tri Thanh of Central Institute for Economic Management, there are still potential risks and traps for hasty investors in real estate market in 2012, due to vagueness and lack of information. From the macro-angle, attention to real estate is still preceded by that to current top priority tasks, which are macro stabilization, inflation prevention, liquidation of weak banks, and production and trade stabilization. Despite being better than last year, the current policies are still strict, which makes it not possible to save the real estate market.

 

In the opinion of Mr Tran Kim Chung, from 2012 to 2015, there will be a market adjustment wave. There will be both some insiders leaving and some new participants in the market. The market will remain stable or decline a bit during 2012, then go up from the end of the year and reach the peak at approximately the end of 2014 or the beginning of 2015. However, from now to that time, real estate should overcome its inertia in the transition from monetization to financialization. 

 

Mr Chung also advised that the most important thing for real estate enterprises at present is to restructure investment category to suit their scope and capacity. Moreover, they should do at their best capacity to complete on-going project to take back the invested resources for medium-term works.

 

As for enterprises, the representative from Dat Viet Group Corporation said that, to survive and develop for the long term, the very first thing Vietnamese businesses have to do is planning and relocating their human resources to match their actual status, and concentrate on training high quality personnel. Mechanism, regulation on legal framework and transparent structure within enterprises should be developed and completed so that employers and employees are clear about their benefits, creating motivation for production. The businesses should reasonably use mobilized capital, avoid scattering investment and, if needed, associate or merge with others to strengthen financial capacity, reduce production cost so that they can survive and develop in the current context.

 

The corporation also recommended the Government should soon build legal documents regulating issues of real estate tax, land price, personal tax arising from property transaction, mortgage of land use rights. These should be introduced shortly, as well as a Housing Mutual Fund and new mobilization channels for social housing projects. There should be preferential policies for investors and real estate trading enterprises that participate in construction.

 

 It is undeniable that current policies and legal documents play an important role in managing and developing the Vietnamese real estate market. However, experts suggest the system should be adjusted to create new impulse for the real estate market, not only to overcome immediate difficulties but to see long term growth and catch up with regional and world trends. Besides, it is necessary to foster administrative procedure reform activity, and speed up project progress so that houses can be eligible to enter the market soon.

 

All experts share a positive opinion that since real estate market is at the plateau, it will surely see changes and be able to make a breakthrough.