Real estate is quiet, businesses are in trouble, but house prices are still increasing steadily without "resting"

After more than a year of stagnation, the real estate market has begun to show positive signs of recovery. However, there is little momentum for a breakthrough.

Real estate businesses are still in a difficult position.

At the Real Estate Market Sustainable Development Forum held on September 22, Mr. Pham Tan Cong, Chairman of the Vietnam Federation of Commerce and Industry (VCCI), said that real estate businesses are still facing many difficulties, and the number of newly established real estate businesses in the quarter decreased.

real estate business center use but house price still increase without doubt picture 1 — Mr. Pham Tan Cong, Chairman of the Vietnam Federation of Commerce and Industry (VCCI). (Photo: DDDN)

Specifically, in the first quarter of 2023, there were 940 enterprises, down 63.2% over the same period in 2022. In addition, the number of dissolved enterprises and enterprises temporarily ceasing business operations was 341 enterprises, up 30.2% and 1,816 enterprises, up 60.7% over the same period last year.

According to the Chairman of VCCI, enterprises operating in the real estate business sector are currently facing many challenges and must change their business and management plans such as debt restructuring, business restructuring, downsizing investment in production and business, streamlining the apparatus, and reducing the workforce.

“Many businesses have stopped implementing new projects, stopped issuing shares to increase capital, and some businesses have reduced their workforce by up to 50% to cope with the current difficult conditions,” Mr. Pham Tan Cong emphasized.

In particular, the policy system related to the land sector has many limitations, especially the 2013 Land Law, which after nearly 10 years of application has shown its shortcomings in not keeping up with or not being able to sufficiently control new situations in the real estate market.

The Chairman of VCCI analyzed: The Land Law has the scope to regulate land ownership and land use relations, but in the process of organizing the implementation of the Laws related to real estate, there are contradictions and overlaps.

“These contradictions and overlaps have caused difficulties in implementation, reduced the effectiveness and efficiency of legal regulations, and led to ineffective exploitation of land resources for socio-economic development,” said Mr. Cong.

Mr. Pham Tan Cong also said that the 2013 Land Law is currently being amended, has been discussed in two sessions of the National Assembly and may be passed at the next session.

Recently, the National Assembly and the Government have organized to collect opinions from the people and the business community. The 5th session of the National Assembly also discussed and gave opinions for the first time on the draft Law on Housing (amended) and the draft Law on Real Estate Business (amended).

Thus, there will be a historic opportunity that all three most important bills for the real estate industry will be considered and passed by the National Assembly at the same session - the 6th Session in October 2023.

“These laws will directly affect the rights and interests of the people, as well as directly impact the real estate market, housing market and economy,” said the Chairman of VCCI.

Difficult market, house prices still increase steadily

Meanwhile, Mr. Hoang Hai, Director of the Department of Housing and Real Estate Market Management, Ministry of Construction, said that the real estate sector in Vietnam has faced many difficulties from mid-2022 until now.

real estate business center use but house price still increase without doubt picture 2 — Mr. Hoang Hai, Director of the Department of Housing and Real Estate Market Management, Ministry of Construction. (Photo: DDDN)

In particular, the sharp decrease in purchasing power and liquidity has also increased difficulties. Specifically, the decrease in supply has caused real estate, housing, and land prices to start increasing since the beginning of 2021.

By the end of the year, apartment prices had increased by an average of 5-7%; prices of individual houses in the project increased by 15-20%; land prices increased by 20-30% compared to the end of 2020.

The most typical example is that apartments are continuously setting new price milestones due to the decrease in the number of apartments put on the market. Apartments in affordable apartments are priced at 25-30 million VND/m2 - 30 million VND/m2, mid-range apartments are priced at 30-50 million VND/m2, luxury apartments are priced at over 50 million VND/m2, starting to exceed the investment capacity of the corresponding classes of people.

Mr. Hai assessed that currently, many housing and urban area projects under implementation are facing difficulties, obstacles or have stopped implementation due to many reasons, typically reasons related to land law.

Currently, many projects are facing difficulties, obstacles, and slow implementation due to regulations on land valuation methods. Many projects are facing difficulties, obstacles, and slow implementation due to regulations on land valuation methods.

The reasons are related to the law on planning, the authority to locally adjust the general planning; the conditions and time for reviewing, updating, and adjusting the planning to ensure consistency in construction planning including general planning, zoning planning... or reasons related to the law on investment.

real estate business center use but house price still increase without doubt picture 3 — Real estate is sluggish, businesses are in trouble, but house prices are still increasing steadily without stopping. (Photo: RT)

In addition to legal difficulties, there are many problems related to social housing, credit sources, corporate bond issuance, and implementation organizations when the legal framework is available but implementation is still slow for many reasons.

In addition, many information flows have caused confusion for investors, affecting life, markets and businesses.

Mr. Hai said that in order to create a breakthrough momentum, in the coming time, ministries, branches and localities still need to focus on reviewing and removing procedural obstacles to complete investment preparation procedures, focusing on removing difficulties, promoting the development of the real estate market for both sellers and buyers...

At the same time, the authorities urgently organize the establishment, appraisal and approval of urban and rural construction planning, land use planning and plans. Review and supplement urban planning, industrial park planning, ensure adequate land fund for social housing and workers' housing development, and strictly implement the regulation on reserving 20% of residential land fund invested in technical infrastructure in commercial housing projects and urban areas for investment in social housing development according to the housing law.

“We will monitor and grasp information and developments of the market and take timely measures to stabilize the market, preventing price fever and real estate bubbles in the area,” Mr. Hai emphasized.

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