“Flourishing Real Estate Market Will Positively Impact Macro-economy”

First of all, I reaffirm that the real estate market is of great importance, directly related to a huge amount of assets both in scale and value in the national economy. So when the real estate market develops, a large amount of capital in place will be mobilised. Many global studies come to the conclusion: if a country can effectively turn its property into commodities and make valuation of it, its economy will possess a significant capital potential to develop socio-economic toward set goals. A developed and well governed real estate market will help boost economic growth through stimulus measures on land, creating factories and facilities, thereby creating a significant shift in the structure of sectors.

 

The current demand for real estate is real and holding enormous potential, especially in large urban areas. The truth is the segment of social housing, affordable housing is falling behind the high demand of the market, and current number of affordable houses under VND2 billion is currently not enough to supply the market.

Meanwhile, the commercial segment of luxury houses remains sluggish, mainly due to the in-progress construction. Some complete areas are too expensive for the market. The majority of the segment of villas and townhouses is held by investors. However, in general, the real estate market has shown some good signs, besides the huge demand for affordable housing, the foreign exchange flow is turning back to the country to buy valuable real estate. To prepare for this, some businesses in Ho Chi Minh City, such as in Phu My Hung, have started to take the villa segment as the centre for the 2014 development plan. What I want to say here is that the foreign exchange flow can bring huge opportunities, especially when the villa segment is growing very well with fairly high liquidity, despite the mistaken assumption otherwise by many people.

 

I totally agree with this point of view; macroeconomic policies often have a huge impact on the development of the real estate market. These policies help screen investors to choose the best ones of high professional, financial capacity and limited property speculation to ensure the sustainable development of real estate. Unfortunately, in practice, many policies have limited the flow of money into real estate market and made the market stagnant recently.

 

Vietnam’s real estate market is currently under strong impact from governmental policies, specifically the implementation of Resolution 11 to stabilise the macro-economy including tightening credit policies, cutting public spending has reduced supplies to the market, slowed down the construction of on-going projects due to difficulties in accessing bank loans.

 

Decree 71, aside from its’ positive side, also contains a number of unfavourable provisions making the real estate market face some challenges such as limited cash flow, apart from bank credit, into the real estate market. This is idle money in people, capital from secondary investors and foreign exchange. In my opinion, this is a form of primary stock which is very important for real estate. Letting this resource waste away means that we are throwing away part of the momentum for real estate development.

 

Decree 69 also makes businesses somewhat less motivated to invest in real estate when leaving the compensation negotiation to businesses and local people, leading to many lawsuits. Many investors, real estate businesses have been facing difficulties and risking serious loss.

 

A recent policy on notarisation also dampens intention of businesses and investors in purchasing or transferring real estate due to the requirement of red book in any case of purchase, transfer or deposit.

 

As for local authorities, they have yet to create favourable conditions for businesses, resulting in delayed construction, leading to overprice and missed opportunities. From my view point, the unsuitable policies and lack of determination from local authorities has made it difficult for real estate enterprises to implement projects.

 

However, all of those above do not mean that real estate enterprises have no fault in this. I have noticed some cases of poor and unprofessional property investing, businesses invest to follow the trend despite not having sufficient financial resources.

 

All reasons above lead to a conclusion that we have failed to create motivation, but caused loss of confidence in the real estate market, both in investors and customers. That’s the basic cause leading to the sluggish situation of our real estate market over the past few years.

 

First of all, I fully agree and support the introduction of Resolution 02 of the Government on solutions to remove difficulties for enterprises. The resolution has blown a new wind in the real estate market of Vietnam.

 

However, for the resolution really come to life, in 2014, all levels of sectors, localities and political system must put in all efforts in order to end the crisis for businesses in general and real estate businesses in particular. It’s also crucial to make adjustments to policies to better suit the actual situation, to promote effective policies and remove flawed ones, so that real estate market can have new impetus and new confidence to grow.

 

Houses under construction or completed but on inventory due to large apartment area are allowed to be restructured based on demand and paying ability of people, depend on each area’s characteristic. Projects of commercial houses have received clearance but have yet to implement housing projects are allowed to restructure into social housing for low-income people and workers. Housing projects which cannot find customers may consider switching to the service building in high demand such as hospitals, schools, hotels, commercial services.

 

Besides, locals whose large real estate inventory should minimize investment from budget in building resettlement housing, social housing, instead using planned investment capital and proposing government to buy commercial housing projects to supply for the demand of resettlement and social housing. Local authorities should establish permanent departments to solve as soon as possible the adjustment from commercial projects to social housing, affordable housing under VND15 million/m2 so that businesses can make timely investment, creating products to supply the market. And for eligible businesses, local authorities should make legal confirmation so they could purchase and implement projects in a timely manner.

 

Meanwhile, the banking credit is in urgent need of some comprehensive solutions. The State Bank need to direct banks to keep credit growth of 15 percent/year at least, making this a compulsory target. Only then would the new money be pouring into the market, creating a driving force for the positive shift in the economy.

It’s necessary to continue to implement VND30 trillion credit package, however some adjustment is needed, for example increase loan term to 20 years, remove the notarisation policy to create favourable conditions for real estate purchase and transfer, both in social and commercial houses, thereby creating more liquidity for the market. The state and banks also need to create other incentive packages, not only focus on social housing but also on other segments such as commercial and villas.

 

As for businesses, we need to be detailed, working with each business. If capable, professional enterprises of financial accountability have any difficulty, we must remove it as soon as possible for them to continue to grow. Businesses also need to restructure their products to suit the market, restructure company's ability to develop projects and products of high competitiveness in a market in which demand of buyers had already taken form. Incompetent businesses will automatically find that they had no place in the market while businesses with adequate resources, good strategic and logical structure will continue with their projects.