In the past 5 years, the Vietnamese real estate market has recorded continuous price increases, which is considered the result of a legal system with many loopholes, giving rise to corruption in planning by some State officials, or speculation, manipulation, and price inflation by market participants. If the situation of high housing prices is not controlled soon, it will leave many consequences for the economy and social security and safety. To better understand this issue, Kinh te & Do thi reporter had an interview with Vice President of Hanoi Real Estate Club Nguyen The Diep.
Sir, in the past 5 years, the housing market has continuously recorded an average price increase of 15-20% year-on-year, with some areas even increasing by 35-40%. What is the cause of this situation?
- We all expect that after the revised and supplemented laws (Land Law, Housing Law, Real Estate Business Law) related to the real estate market come into effect, they will contribute to reducing house prices. But in reality, house prices are still increasing steadily, even increasing rapidly, and there are no signs of stopping. There are many reasons to explain the continuous increase in house prices, but in my opinion, it is due to the impact of both supply and demand, financial policies, and psychological factors.
First of all, it is the imbalance between supply and demand, due to the rapid increase in mechanical population, especially in large cities, leading to high demand for housing and investment, while new supply is limited due to limited land fund, complicated legal procedures slowing down construction progress. And also due to the process of infrastructure expansion, urban planning (also known as urbanization) has had an impact on increasing real estate prices in areas with planned and invested infrastructure; or with the urban expansion policy, the conversion of agricultural land to residential land also has a significant impact on increasing real estate and housing prices.
Furthermore, due to the speculation and surfing of some groups of people, many tricks have been used to push up the prices of houses and land to increase virtually, causing many people to fear that the prices will increase even more, so they rush to buy, causing the market to establish new price levels.
At the same time, due to legal issues and State management, this story has been mentioned many times, legal problems have caused hundreds of housing projects to be stopped or delayed, reducing the supply of the market; or the amended Housing Law has expanded regulations for foreigners owning houses in Vietnam, which will also have an impact on increasing house prices.
Another factor I would like to mention is the financial policy and the increasing cost of construction and materials. Recently, the banking system has continuously adjusted the lending interest rate downward, and at the same time, at a time when inflation is still high, people have chosen the real estate channel as a safe place to hide their assets, which also makes housing prices more expensive. In short, the increase in real estate prices is due to the impact of many economic factors, policies and market psychology. If not well controlled, it can lead to a real estate bubble and many consequences for the economy.
What are the consequences you are referring to here?
- Objectively speaking, the real estate price level in Vietnam is still much lower than in other countries in the Asian region, so it is not surprising that we have experienced periods of "hot" growth, it is only inevitable in the process of opening up the market economy over the past decades. We must look at the increase in real estate prices from two aspects. On the positive side, in areas with synchronous and complete infrastructure investment, the increase in prices reflects actual development, which will increase the overall social products of the entire area, and improve people's lives.
But in areas that have not yet invested in infrastructure, there is only planning information but land prices are skyrocketing, while transactions are mainly buying and selling and there is no real need for use, those places have the intervention of speculators, land brokers... affecting the overall development of the whole area, when land prices are high, businesses do not want to implement projects, leading to land being abandoned and not being put into use, those who have "held" the land before are at risk of losing or burying capital that cannot be reproduced or done business.
In general, the increase in real estate prices has both positive and negative effects, but if it increases too quickly or uncontrolled, it can cause many serious consequences. When housing prices increase, many people, especially low-income workers, cannot buy a house, the gap between rich and poor becomes larger, leading to inequality in society. At the same time, when prices increase too quickly due to speculation without reflecting the real value, it can easily lead to a bubble and if the bubble bursts, prices fall sharply, many investors lose money or with large debts may have difficulty repaying when interest rates increase; while banks face the risk of bad debt, affecting the financial system.
The most worrying thing is that the money flowing into real estate without being withdrawn instead of being used for production and business will reduce the motivation for economic development. If real estate freezes, a series of construction, building materials, and financial enterprises will be affected... thereby increasing inflationary pressure, because when real estate prices increase, rental prices and service prices will also increase, making the cost of living higher, which will lead to increased consumer prices, creating inflationary pressure.
So what is the solution to limit this situation, sir?
- Stabilizing housing prices is a complex problem, related to many factors such as supply and demand, financial policy, speculation and urban planning. However, saying that does not mean that there is no really feasible solution, but the issue here I want to emphasize is the regulatory role of the State management agency, from a personal perspective I would like to present a few issues as follows:
Firstly, it is necessary to quickly increase the housing supply through land expansion. The State can plan more land funds for housing development, especially social housing and housing for low-income people; encourage the construction of low-cost housing, provide tax incentives, reduce construction permit fees or provide financial support for enterprises developing the affordable housing segment; at the same time, take advantage of vacant housing funds, tax or have policies forcing owners to put vacant houses on the market to avoid speculation.
Second, it is necessary to strictly control speculation and price inflation, through imposing high progressive real estate taxes on those who own many real estates but do not put them into operation (for rent or sale); tighten credit lending to control capital flows into real estate, limit speculative loans; make market information transparent, build a database on real estate transactions to avoid price manipulation; strictly handle acts of price manipulation or creating real estate bubbles and closely monitor suspended projects; if investors do not implement the project within the committed time, their land may be revoked.
Third, the State needs to have more supportive policies for real home buyers, with preferential loan packages and low interest rates for first-time home buyers or low-income households; limit transfers immediately after purchase, and apply regulations that allow resale only after a certain period of time to limit speculation.
Fourth, is to strengthen price management and planning policies, focusing on controlling social housing ceiling prices. The State can apply ceiling prices for housing for low-income people; at the same time, promote investment in developing satellite cities to reduce housing pressure in central areas by developing infrastructure and transportation connecting with neighboring areas. In general, to stabilize housing prices, coordination between the government, businesses and people is needed, but the most important thing is to control speculation and promote reasonable supply for sustainable market development.
Thank you!
10:57 20/02/2025
Source: https://kinhtedothi.vn/kinh-te-dinh-tre-lam-phat-tang-neu-khong-kiem-soat-duoc-gia-nha.html
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