How to save the property market?
11-06-2012
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The property market has never before fallen into such a prolonged state of sluggishness as it is currently experiencing.
The Chairman of the Ho Chi Minh City Real Estate Association(HoREA) said up to 90 percent of property businesses suffered losses last year because they failed to sell land and houseswhile having to pay very high lending interest rates. In addition, they are not one of the business groups that are eligible for preferential loans.
In a recent online public dialogue on the Government e-portal, Minister of Construction Trinh Dinh Dung attributed the cause of the gloomy market primarily to the shortage of credit capital. If abundant capital resources are made available at lower interest rates, the market will grow along the right track.
At a recent seminar on ways to help the property market bounce back, Chairman of the Vietnam Real Estate Association, Nguyen Tran Nam, said there have been some positive signs in the market due to the Government’s plan to disburse the remaining VND120,000 billion in capital resources allocated for public investment, which is expected to help businesses iron out snags.
The inflow of money from the public is now mainly being invested in gold, US dollars and deposits, but sooner or later it will flow into real estate when interest rates are lowered and other investment channels are no longer so attractive.
If the amount of available capital in banks increases in the near future, real estate businessescan borrow again to give the market a new lease on life, Nam said.
The bottom line regarding the nearly frozen the market is that the supply is greater than the demand, which has led to a significant decline in real estate purchases.
Over the past decade, the property market attracted a large amount of social resources but it was primarily focused on high-end houses, which were bought mainly by speculators. The large sums invested in this market segment have adversely affected the market's development.
The fact is that high-end apartments and villas have mushroomed everywhere while most urban residents cannot afford an expensive house and still live in cramped, narrowapartments.
Real estate developers pay little or no attention to building houses for low- and middle-income earners because the profit ratio is not as high as that for high-end houses. As a result, the supply of up-market housing is higher than the demand, forcing real estate businesses to sell off properties at reduced rates to cut their losses.
However, reducing prices to save the property market, as suggested by businesses, is ineffective. Recently, several investors proposed building apartments suitable for the pockets of those with a real demand for accommodation. But in fact, what this solution actually proposes is dividing large apartments into smaller ones for easier sales, while the investors maintain their profits based on the square meter area of the entire building.
To resolve the situation, the main cause must be properly analyzed to find an effective solution to help the sluggish real estate market get out of the doldrums and move towards sustainability.
