“Credit Valve” Likely to Be Open for Real Estate Market in 2013

The SBV has planned to open the credit valve for the real estate sector, this is really good news for the market which has been “frozen” for the last 2 years due to lack of investment capital. However, real estate enterprises are still worrying about the route to access loans. It is too difficult for enterprises waiting for this Decision to gain access to loans, because they have mortgaged all their assets to pay old debts. Several enterprises still have assets to mortgage, however the value is too small to revive their businesses.

 

At the seminar “Vietnam Real Estate Market Outlook 2013”, Dr Tran Kim Chung from the Central Institute of Economic Management affirmed that the market would not crash down, but would remain sombre and may continue the downtrend in the future.

 

Experts in economic fields and real estate also stated that, despite support measures, the market will continue suffering difficulties because of high inventories, real estate prices may go down about 30 - 40 percent. This will be the basis for investors to calculate costs and give more reasonable sales programmes to deal with inventories in 2013.

 

However, Mr Dang Duc Thanh from the Vietnam Chamber of Commerce and Industry said that, after the market has dropped nearly 50 percent over the past year, the price reduction cycle of the real estate market has slowed down, prices in many segments have hit the bottom and will not go down any lower. It is proper time to buy houses, especially for people with real need of housing.

 

Dr Le Chi Hieu, Vice Chairman of Real Estate Association of Ho Chi Minh City also added that, apart from projects with high financial pressure and being forced to lower prices, overall, real estate prices will hardly be lower.

 

Experts agreed that besides mechanisms and macroeconomic policies to support the market, taking back the confidence of consumers is essential. Methods to clarify information about prices and real estate indicators, and land taxes should be modified such as reduction of VAT, land tax, corporation income taxes, and support real estate enterprises in compensation and site clearance. Enterprises should have policies to lower prices, attracting more objects to buy houses.

 

In the evaluation of the medium - term, Dr Dinh The Hien, Director of the Institute of Information and Business Research stated that positive support from the Government at the end of 2012 is a cornerstone for the belief that the real estate market will gradually recover in 2013 - 2014.

 

Mr Tran Van Tan from the Credit Department - SBV said that in 2013, in accordance with factual conditions, credits will be disbursed with more selective manner. Accordingly, SBV will loosen the credit valve for nearly completed projects and social housing, while for real estate products with high quality and offices for rent, credit is still tightly controlled.

 

In 2013, market will be under pressure of price depreciation when commercial banks will be forced to mortgage real estate properties of customers to regain money. This wave started from the mid term of the third quarter in 2012, but it will become stronger 2013.

 

Based on market demand, and the policy the Government and SBV apply to the real estate sector, in 2013, there may be a burst in real estate for medium income people with small area and reasonable prices. The recovery process may last up to the last quarter of 2013, but it seems to be a firm fundamental for market to develop. Liquidity will improve, so capital demands of enterprises from banks will also be shared.

 

Most real estate professional experts have expectation of a better situation of real estate market; in the situation that interest rate should be lower and kept stable as a single-digit figure, market demand is still large enough, the stimulation needs many quick solutions for house buyers to borrow with low interest. However, the buyers are not capable of proving their salaries through official payroll. Because of that, if there will be a financial solutions packages appropriating with personal salaries of house buyers, and the real estate market will be reopened.