Although in the past several years, the ups and downs of the real estate market have always been associated with market growth policies, apparently it’s impossible to find effective remedies for the “disease” of the market, so many small and medium enterprises are facing the risk of bankruptcy, and the banking system is also fluctuated because of the market.
The knots of the market
Mechanisms and policies are regarded by many investors as not feasible because they are unable to meet the market demands, the state of suspension or project planning mismatch always occur or untimely clearance make investors face many difficulties in the implementation; many overlapped and complex regulations make the transparency of the market go down, and the opportunity cost of many investors lost. In particular this is the opportunity for corruption to arise, leading to increases in input costs; all increases in prices have been paid by real estate buyers.
Next is the issue of funds to maintain and develop the real estate market. They are sensitive issues and have a major impact on the economy, solving the capital for the market is still a difficult problem for policy makers. The credit sources in Vietnam do not have enough for the real estate businesses to expect and support for the development, it is imperative that these enterprises have to depend heavily on the banking system.
This leads to the immediate close of capital for real estate market when the credit banking system faces difficulties. This not only leads to the consequences of a series of real estate businesses at risk of closure but also the banking system facing the risk of rising bad debts. It is urgent to solve this problem because the banking system mainly provides short-term funds for the economy.
Market supply-demand problem depends heavily on the identification and long-term vision of the investors. Excess supply too much in the present time reflects a reality that, in addition to the small capital, the investor has not evaluated the needs of the market. On the macro side, the State must also take responsibility for this matter, when the real estate market has not yet developed stably and low transparency leads to speculation and market manipulation.
To regulate the development of the property market, good operating mechanisms such as interest rate support, financial aid and tax exempts are needed, in particular, to solve the problem of social security, housing for low-income people, housing for workers in industrial parks, export processing zones will contribute to market stability.
Risk of the loans
We cannot deny the impact of bank capital to the real estate market, according to statistics from 2006 to mid-2011, particular in the area of Ho Chi Minh City real estate loans of credit institutions has increased three-fold, and by August 2012 it was up to VND82,517 billion, accounting for 10.71 percent of total outstanding loans across the province.
Too much reliance on credit from banks has brought negative reactions whenever the State Bank tightens monetary policy. Therefore, that the market developed at the peak represented the lack of sustainable development and too much risk.
Although recent years, many support policies to stimulate the real estate market to recovery such as commercial banks using a maximum of 30 percent of short-term capital for medium and long term borrowing, except some of the demand for capital real estate loans from the groups do not encourage lending and controlled. This excluded group accounted for 45 percent of total real estate loans (equivalent to VND37,376 billion) this is the object that needs to build, repair and buy a house.
The bank also took the initiative to reduce their lending rates 3 times in a row from 15 percent/year to 13percent/year for four areas including agriculture, export, small and medium-sized enterprises and supporting industry, with outstanding loans by mid-September was VND74,419 billion. The State Bank also conducted reschedule for old loans with the total loans of VND70,369 billion, and at the same time decreased the maximum interest rate of 15 percent / year for the old loan of VND152,522 billion.
Excessive dependence on bank funding has made the risk of bad debts increase. Currently there are some projects with bank loan rate up to 80 percent with a term of 15 years, in the situation of market continuing to extend the current freeze, it is unavoidable to turn into bad debt.
Many proposals and solutions have been put in place to save and rescue market and investors but they have not yet brought into effective.
DinhThanh
Vietnamese
