Though some measures launched recently to rescue the real estate market are not misleading, quite a few people keep suspecting their applicable scope.
At a conference unprecedently held by the Economic Committee of Vietnam National Assembly with an aim to working out solutions to remove difficulties for real estate market, Deputy Tran Xuan Hoa, one of few entrepreneurs frankly said “The status of real estate market remains a mystery. We have cured but still fail to exactly diagnose its disease”.
Mr Hoa’s opinion is supported by many other deputies. Given the statistics, the total value of capital is around VND111,963 billion in which bad debt accounts for 6.5percent of total real estate outstanding loan, lower than the general bad debt. The Minister of Construction reiterated for several times that the inventory is reported insufficiently and the bad debt only reflects part of the actual situation. Most of the real estate businesses were unable to settle the payment as a result of failing to get the products consumed. It implies the fact that the bad debt is going to be on the rise in the coming time.
The vague information capture has made many people wonder whether it is high time to rescue the market and more importantly if it is high time to do such thing, it is urgent to identify who will be rescued and which measures should be conducted to rescue those people.
Identifying rescued components
It is compared that the real estate market and financial market are two wheels of a motor. If one wheel is deflated, another cannot run. Dr Tran Du Lich stated that it is vital to remove the difficulties for this market. However, this should be conducted step by step as the money is not sufficient enough to inject into the whole market in one time.
The support policies should focus on the segments of popular houses of around one billion dong. Businesses then aim at building this type of house so as to enjoy the support in terms of tax, credit incentive for the buyers”, Dr Lich said. Deputy Le Nam from Thanh Hoa province frankly shared “The current situation is the consequence of unhealthy and spontaneous business period. It is imperative to handle with “price pushing” before directing at rescuing.
In a response to the press earlier, Mr Mai Xuan Hung, Vice Chairman of the Economic Committee of the NA, presented a quite persuasive example with an aim to give a warning. The most important is to get the price back to the real value. That is the way that can ensure the proper use of state budget and social justice. Mr Hung further shared that recently when attending a commencement ceremony of social apartment building for Ministry of Public Security’s officials and soldiers, the project owner revealed that although the price has reduced to VND 13.5 million/m2, they still get profit up to 20 percent and soon after the commencement, they have sold 70 percent of total apartments.
No flying stick is powerful enough…
Although there are hardly any opinions objecting to this “rescue” scenario for real estate market of Ministry of Construction, the implementation method as well as the feasibility of this scenario remains skeptical to many people. Even the measure namely “VND40 billion support package with low interest” that is greatly supported by many people need to be implemented systematically and selectively, avoiding the situation that people having housing demand are not supported while money keeps pouring into the rich’s pocket. Many people must have remembered the fact that when a social housing project in Hanoi was commenced, there were so-called needy persons in luxurious cars (the value of their cars may be two times or three times as great as that of a house) being the applicants.
Furthermore, “the allowance of transfer of commercial housing projects into resettlement and social ones for sale or lease to policy people is considered only a temporary measure” stated Dr Le Dang Doanh, Former Director of the Central Institute for Economic Management. The important is to radically change the product structure in the market and prevent the “price pushing” situation. “In the USA, if you sell an apartment that you have not stayed there any single day, you will be charged tax rate of 34 percent. If you sell an apartment that you have stayed there for 3 years, you will be charged tax rate of only 4-6 percent”. This is designed to prevent the real estate trader from benefiting from price difference and speculation”, Mr Doanh stated.
On the other hand, as explained by Minister of Construction Trinh Dinh Dung, the reaction of real estate markets in Hanoi and Ho Chi Minh City are different. “The market in Ho Chi Minh city started to freeze in 2008, earlier than in the north. The outstanding debt is also greater and the price is down differently with the lowest at 5 percent and the highest at 50 percent. In Hanoi, the bank loan proportion is lower. Investors are dependent on the fund source of secondary investors or clients. Therefore, there cannot be such a “shocking” price decline phenomenon. Therefore, different solutions should be designed for each market.
From the analysis, Minister Trinh Dinh Dung summarized that the support campaign for real estate market has a close relationship with residential housing development strategy with special focus on social housing segment. Time will answer the specific result. But it is certain that social housing segment will warm up, the market will face fewer difficulties and get better in parallel with the recovery of the economy.
It sounds promising. Yet, there still exists a query raised by Mr Ngo Van Minh, standing member of National Assembly’s Law Committee “One-billion dong houses are social ones yet? Who are the poor that have one million dong to buy houses?”
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