“We should not confuse the real estate market rescue with the estate business bailout,” said Dr Pham Sy Liem, Former Deputy Construction Minister.
The collapse of real estate market will hurt the entire economy
Dr Liem said as a business entity, a real estate company must account for whatever it does. It can make a profit or suffer a loss or even go into bankruptcy. This is what a single business entity faces.
However, the slump of real estate market cannot be compared to the failure of a real estate business. If this market collapses, it will affect the entire economy. Therefore, Vietnam should not let the real estate market in free fall. It should have certain intervention measures because this market has significant attraction coefficients as it correlates with construction market, material market, and creates many jobs.
He also noted that the VND30 trillion (US$1.4 billion) bailout package will help reduce hardships on the market, not to rescue real estate companies.
However, Dr Liem said the bailout package only helps ease the severity of recession, not change the rules or get rid of long-lasting ulcers of the real estate market.
The real estate recession in Vietnam is both a challenge and an opportunity. The crisis reveals weaknesses hidden in the prime time. For instance, many property companies do business without enough capital and even knowledge. The bankruptcy of some property firms is a valuable lesson for us to avoid such mistakes, he noted.
How to bring real estate prices to a reasonable level?
Dr Liem said real estate prices in Vietnam are on par with those in developed countries because urban land prices are overvalued. So, how to bring housing prices to reasonable levels is what the State authorities need to consider.
He proposed cities set aside land funds for housing projects, or clear the sites for future projects.
"At that time, there will no projects at all. After the land is reclaimed, infrastructure will be built and the area will be divided into lots for school, commercial centres, affordable housing projects, upmarket housing projects, etc. Property prices will be fixed on the transparent bidding mechanism. Publicity will help eradicate corrupt acts. This is a valuable experience in fighting against corruption in Sweden in the early 20th century and Vietnam should learn it,” he suggested.
Huong Le
Vietnamese
