The robust recovery of the real estate market in the second half of 2014 is delighting both primary and secondary investors. In 2015, the market is projected to stage a strong rally. Vietnam Business Forum interviewed Mr Nguyen Tran Nam, Deputy Construction Minister, on property market developments in 2015 and beyond. Dinh Thanh reports.
In the past 20 years, the development of the real estate market has been largely spontaneous. This causes deadlock and oversupply. How could this be addressed?
The property market used to fall into a stalemate due to poor planning and lax management. At present, the market has taken shape and developed under the market mechanism. Real estate business is now contributing 5.3 percent to the country’s GDP and outstanding real estate loans valued at VND265 trillion at the end of 2014, accounting for 8 percent of total loans outstanding. The rapid, strong development of real estate market has partly met housing demand of the people, especially in big cities.
Shortcomings of the real estate market cannot be handled overnight, particularly planning issues. In the past 20 years, the market has evolved without practical planning.
To date, market bottlenecks have been gradually addressed. The Ministry of Construction has advised the Government to issue a series of measures to overcome weaknesses and ensure market balance, including contextual and long-term policies. The ministry recently submitted to the Prime Minister the real estate market development scheme till 2020 with nine key contents. I hope that the market will develop stably and sustainably soon.
The property market will revive and thrive in 2015 on economic recovery. The new Law on Housing and Law on Real Estate Business (amended) will be strong boosts to the property market in the coming time.
Would you mind telling us more about these solutions?
In early 2013, the ministry submitted the Resolution on Real Estate Market to the Prime Minister and the ruling had brought in positive results. Interest rates have fallen sharply; tackling bad debt has been easier; more homebuyers can access many credit packages; and foreign investors will have more favourable conditions. A lot of stalled construction projects have been revitalised.
In the past boom, investors concentrated on the upmarket property segment because of high profit margins. A series of high-grade apartments were built and offered at over VND2 billion per apartment. Meanwhile, it is hard to find houses with a selling price of below VND1 billion.
The market was oversupplied. Investors had to change their planning and investment options to build affordable houses selling at below VND1 billion each. This helped improve market liquidity. The Ministry of Construction is currently reviewing investment projects. Good ones will be lent for completion and boost market liquidity.
The ministry advised the Government to submit the Law on Real Estate Business and the Law on Housing to the National Assembly. These new acts encourage both domestic and foreign investors to invest in real estate businesses.
In fact, foreign investors are still struggling with land procedures in Vietnam. What is the reason?
Although the legal framework of the real estate market has been amended and supplemented in recent times in order to improve and meet actual demands, more points need to be further amended and supplemented.
These cannot be resolved in one or two days. A lot of inappropriate regulations related to the real estate field are still in existence and they sometimes cause companies to lose business opportunities.
The Government advocates public administration reform but localities sometimes misinterpret governmental policies. This shortcoming needs to be addressed soon.
The Ministry of Construction will intensify inspection and supervision before investors carry out their projects.
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