Although the property price has been declined slightly, the majority of customers still have concerns about buying. The government's recent demand stimulus packages have made many people believe in the recovery of real estate in the near future. However, according to those with experience in real estate activity, the market is regulated under the "unwritten rules" that make a decline of housing price to actual value not easy to implement.
Real estate firms rely on bailout
As of mid-May, the real estate situation in the country did not show any positive sign. The credit package of VND30 trillion to stimulate the property market just created a little hope for those who are most optimistic. This hardly helps warm up the market right away. Basically, the government approved an amount of VND30 trillion to help low-income people buy housing, but till now, people have not accessed this financial aid.
Recently, the Finance and Budget Committee of the National Assembly proposes to continue the 50 percent discount of value added tax on the sale and leasing the apartments with areas less than 70 sq. metre and values less than VND15 million per sq. metre. The credit support packages of VND30 trillion was seen as a good sign for the real estate market after a long period of slump.
The demand stimulus is a prerequisite for the recovery of the market, so many real estate firms put high expectation on the government bailout of VND30 trillion, along with the tax reduction of the Ministry of Finance, the reallocation of apartment areas of the Ministry of Construction and the interest incentives for home buyers of the State Bank Vietnam (SBV). If such measures are comprehensively implemented, the property market is likely to revive in the near future. However, the investors' confidence in the recovery of the market has faded away after the bulk of mechanisms and policies issued proved to be ineffective.
By this time, the above-mentioned solutions basically have not made significant changes for the market, while a number of solutions are not applicable, resulting in inconsistency. Recent research on the three regions reflects that the imbalance of demand and supply is still too large; this results in the slow decline of real estate prices.
While the number of commercial housing projects has been neglected, the bulk of the government's policy focus on supporting low-income people to buy affordable housing may lead a flow of investment into social housing to take advantage of the priorities and preferences. This will lead an exceeding number of social housing and create new urban areas surrounded by primarily houses with average or below average quality after 5-7 years.
Are real estate firms too ambitious?
Recently, the debate between Dr Alan Phan and members of the Hanoi Real Estate Club about whether or not to save the real estate market has attracted many people. This debate shows some basic issues of the real estate market that need to be addressed. In view of the Dr Alan Phan, the galloping real estate value increased by ten times, which created big profitability for investors but an unfair price for the majority of people with real needs for housing, who had not received any bailout for price adjustment. Meanwhile, the government did not hesitate to approve credit packages based on the request of the real estate firms to fix the troubles, mostly caused by their failures in investment decisions and over-ambitious goals.
As a result, when the market went into a freeze, the customers lose confidence in the market. The liquidity of the market is very low now, the real estate firms insist on anchoring the real estate prices and ask the government for the bailout and exhort customers to spend money on their frozen properties.
In fact, the housing prices are still too high compared to the actual income of the people. According to a real estate expert, Vietnam's real estate firms have not learnt to accept the fact of low-to-zero profitability projects, which hardly make profit due to the investors' indiscriminate lending and inconsiderate planning. If properly invested, the businesses would be profitable from 30 percent to 40 percent.
To revive the market, many experts suggest that the housing price needs to be adjusted to the actual value. The government's bailout and market supporting policies are not likely to make any significant change in the housing price.
Tuan Luong
Vietnamese
