Real estate market is warming up but there are still barriers to breakthrough

The real estate market is "warming up"

Most real estate research companies and the Ministry of Construction have a common assessment of the market in the first 6 months of 2023, which is that it is quiet and cannot recover as expected.

Both supply and demand have declined sharply, causing many real estate project development businesses, even the "big guys" in the industry, to be on the brink of bankruptcy. A report from the Department of Business Registration, Ministry of Planning and Investment also shows that in the first 6 months of 2023, the number of real estate businesses temporarily suspending business or dissolving increased by more than 40% compared to the same period in 2022.

Real estate is also the leading industry among 17 other economic sectors in the number of businesses leaving the market.

Meanwhile, a report from the Real Estate Brokers Association predicts that with the current difficult situation, by the end of 2023, only about 43% of real estate businesses will survive.

Faced with this situation, the Government has introduced many solutions to support the recovery of the real estate market, such as establishing a Working Group to remove difficulties, or issuing Resolution 33, offering many specific solutions to remove and promote the safe, healthy and sustainable development of the real estate market.

Dr. Can Van Luc - economic expert commented: The Government's solutions have brought many positive signals to the real estate market. It can be seen that the market has gone through the most difficult period, thanks to financial solutions, especially regulations related to maturing corporate bonds.

“ Thanks to these solutions, the market has been gradually recovering since May 2023. The second quarter grew better than the first quarter, and trading volume and market liquidity are gradually warming up. In addition, the occupancy rate in industrial parks is very high, around 76%, and real estate and construction company stock prices are also increasing, ” said Mr. Luc.

However, Dr. Can Van Luc assessed that the recovery is still slow, many difficulties and problems have not been resolved promptly, and market demand is weak due to the blockage of loans for real estate investment.

Agreeing with this opinion, Associate Professor, Dr. Tran Dinh Thien - former Director of the Vietnam Economic Institute, commented: Recently, the Government has issued a series of solutions to help businesses that do not follow common logic.

The real estate market is heating up but there are still many rumors that need to be resolved.

However, that is the only way to get real estate out of its current difficult situation. If we continue to offer normal solutions, we cannot solve the problems of the market.

" Therefore, the first thing I recommend is to understand that in difficult situations and unusual situations, the approach and solutions must be unusual, " said Mr. Thien.

However, when introducing completely new policies with bold approaches that do not follow conventional rules, the mentality of those implementing the policies is shaken. Many officials are afraid of making mistakes and being responsible, which reduces the effectiveness of the policies.

“ We are at a time when there are many good and focused policies, but implementing policies is not easy. The unusual things hinder the current policy implementation thinking, making people not dare to do it. When issuing new resolutions and new solutions, it must be accompanied by a commitment to responsibility, a commitment to ensure the implementation of responsibility, then the implementation of good policies can be accelerated” - Associate Professor, Dr. Tran Dinh Thien emphasized.

"Don't see flowers blooming and think spring is coming"

While the market is warming up, real estate businesses are worried that a new regulation could hinder the recovery, which is Circular 06 of the State Bank.

According to this Circular, starting from September 1, commercial banks will not be allowed to lend to pay for capital contributions under capital contribution contracts and investment cooperation contracts to implement projects that do not meet the conditions for putting into business.

The State Bank has moved forward, the new Circular 06 does not tighten capital into real estate in general, but only prevents groups of potential risky lenders. However, businesses are still very concerned about this regulation.

Mr. Nguyen Van Dinh - Chairman of the Vietnam Association of Real Estate Brokers (VARs) said: Currently, "legal" and "capital" are two main and inherent difficulties of the real estate market.

“ Although the Government has issued many solutions to remove and resolve these two difficulties, up to now, these two difficulties have not really found a “way out” and a definitive solution,” said Mr. Dinh.

According to Mr. Dinh, there are thousands of projects that are difficult to implement, are shelved due to legal problems, and have to be stopped for review. And there are also many projects that have broken access to credit and investment capital from customers.

In particular, projects that are in the process of site clearance, waiting for land use fee approval, or under construction... lead to stagnation.

“ The fact that both customers and investors are having difficulty accessing cash flow has caused liquidity in the market to be blocked, freezing all transactions, and halting all investment, production, and business activities, etc. ” - Mr. Dinh said.

The Chairman of VARs said that Resolution No. 33 clearly and resolutely demonstrates the goal of removing difficulties in credit sources, aiming to unblock capital flows for the real estate market, contributing to increasing liquidity for the Vietnamese real estate market.

By creating favorable conditions for businesses, home buyers and investors to access credit sources with preferential interest rates, feasible and effective projects will have the opportunity to be implemented, contributing to improving supply to the market.

However, Circular 06 almost does not adhere to the spirit of Resolution 33, and has not clearly specified the subjects that are supported and credit difficulties are resolved.

Meanwhile, the circular points out the subjects that are not allowed to borrow in a general and vague way, making it easy for commercial banks, if they do not have the goodwill to lend, to reject real estate customers' applications in a "correct" manner.

“ This will invisibly affect the efforts of the Government, agencies, and even the banking system in accompanying and reviving the Vietnamese real estate market,” Mr. Dinh shared.

Therefore, Mr. Dinh believes that it is best to withdraw Circular 06 at this time. Instead, the State Bank should research and issue a decree with content that closely follows and is in accordance with the spirit of Resolution No. 33.

Mr. Le Hoang Chau - Chairman of HoREA also said that Circular 06 has some provisions that do not ensure consistency and consistency with legal regulations and are not suitable for the practical investment, construction, production and business activities of the business community in general, including real estate businesses.

“ If we do not amend it in time, starting in September, when Circular 06 takes effect, real estate businesses, which are already facing difficulties, will now find it even more difficult to access loans from banks,” Mr. Chau emphasized.

According to the latest report of Batdongsan.com.vn, updated to the end of July 2023, the real estate market is warming up. In Hanoi and Ho Chi Minh City, land prices tend to increase again, by 9% and 8% respectively compared to the previous month. In addition, some provinces such as Quang Ninh increased by 18%, Hai Phong increased by 9%, Da Nang increased by 8%. The report of this unit also shows that in July, the demand for real estate across the country increased in all types of real estate. Therefore, many experts expect that in 2024, the market will flourish and break out.

Ha An

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