Vietnam's real estate market urgently needs to increase aggregate demand and create supply.

Recently, the Government has had many strong solutions to support the real estate market to recover and break through. In particular, in Resolution 33, the Government has proposed many specific and detailed solutions to "rescue" the market. In fact, the market has also received some positive signals, but has not been able to break through.

Speaking to reporters of the Journalist and Public Opinion Newspaper, Mr. Le Hoang Chau - Chairman of the Ho Chi Minh City Real Estate Association (HoREA) said: In the first 7 months of 2023, the real estate market continued to face many difficulties.

+ How do you evaluate the real estate market from the beginning of 2023 until now?

- Although the real estate market has shown signs of improvement after the Government's solutions to overcome difficulties. However, in general, in the past 7 months, the market has still faced many difficulties, poor liquidity and very limited supply.

The main reasons are unresolved legal issues and limited access to capital, some incidents in the second half of 2022 affecting investor confidence and in general, some fundamental problems of the market have not been resolved, such as legal issues, scarce supply, imbalance of supply and demand...

In fact, Vietnam has not yet fully exploited the potential and strengths of the real estate market. Industrial, tourism and entertainment real estate are only concentrated in some regions, and have not created a driving force and widespread attraction in all areas of the country.

Vietnam real estate market urgently needs to increase demand and create supply source image 1

Mr. Le Hoang Chau forecasts that the Vietnamese real estate market will remain sluggish until the end of 2023, and can only recover and develop more healthily, transparently and in a more standardized manner from the second or third quarter of 2024 thanks to advances in the legal environment; positive economic growth prospects; and synchronous and modern infrastructure development.

Many investment market segments still face major barriers and obstacles. Potential land resources have not been optimally exploited. Real estate in industrial parks, economic zones, export processing zones, and high-tech zones is still developing cautiously and at a standstill, with low occupancy rates.

The demand for housing for all social classes is very large, especially housing for low and middle income earners, but the level of response is limited.

+ Can you analyze more clearly the difficulties of the market in the current period?

- Currently, there are 3 main difficulties and obstacles that prevent the real estate market from breaking through.

Firstly, difficulties related to policies and laws, such as difficulties related to land law, difficulties due to planning law and some difficulties related to investment law.

For example, regarding planning, some projects with detailed 1/500 plans have been approved but are not consistent with the zoning and overall plans and are being reviewed, adjusted, and updated according to regulations.

Or, many projects encounter difficulties, obstacles, and slow implementation due to regulations on land valuation methods; In many cases, land use planning has been announced but there is no annual land use plan at the district level...

Second are difficulties in capital flow. In particular, access to loans for real estate businesses is still not easy, mainly due to 3 issues: high interest rates, project legality and market liquidity confidence. In fact, the real interest rate is about 11-12%/year.

The recent reduction of interest rates by 0.5-2% is a great effort by the Government and the banking system. This move is having a positive effect on the economy and real estate businesses.

However, shortening the project duration by 1 year can help businesses save up to 12-15% of capital costs in interest. Not to mention saving on wages, machinery and equipment, etc. for the whole year.

Strict regulations on risk control for real estate credit help to make the market healthier, closer to actual needs, and avoid price bubbles.

However, currently the financial capacity of the majority of real estate businesses is limited, equity is low, and operations mainly rely on bank credit capital, leading to difficulty in accessing credit capital.

The interest rate on loans under the 120,000 billion VND package for social housing is too high (8.7% for businesses, 8.2%/year for home buyers), causing difficulties for investors and home buyers.

Third, difficulties in aggregate demand and market confidence. It can be seen that aggregate demand has fallen sharply in most segments, especially high-end housing, high-end tourism and resort real estate, and land. Market confidence has declined sharply.

According to a preliminary survey by the Vietnam Real Estate Association, two-thirds of project development enterprises have had almost no new project development activities in the past year.

Meanwhile, real estate brokerage firms cut about 50-70% of their staff. Investors, the majority of investors, did not invest in the real estate market in the recent period.

+ So, what recommendations do you have to help the real estate market break through?

- The most urgent issue now is to increase total demand and create a key supply source for the Vietnamese real estate market. The biggest demand in the Vietnamese real estate market is currently the affordable commercial housing segment. Therefore, to increase total demand, it is necessary to develop this type quickly, strongly and diversely.

However, in the immediate future, the Government needs to effectively implement solutions to support the real estate market according to the Socio-Economic Recovery and Development Program for 2023 and the 2023-2025 period.

In addition, urgently complete the review of legal procedures for real estate projects that are behind schedule/suspended and handle them thoroughly in 2022 and 2023 to create conditions for projects to be re-implemented, ensuring the supply of goods for the market.

I also hope that the State will exempt construction permits for investment projects in areas with approved detailed planning of 1/500 according to Point h, Clause 1, Article 2 of Resolution No. 43/NQ-CP dated June 6, 2014 of the Government on a number of key tasks of reforming administrative procedures in the formation and implementation of investment projects using land to improve the business environment.

Regarding credit capital, I think that commercial banks also need to increase support on interest rates/fees for real estate transactions with electronic payments and non-cash payments.

In addition, I propose that the lending interest rate for the real estate market in the period of 2023 - 2025 is as follows. For the commercial housing segment suitable for income, it is recommended to be below 7%/year.

Social housing segment: For businesses, recommended rate is under 6%/year; for home buyers, recommended rate is under 4.5%/year. For tourism and resort real estate segment, recommended rate is under 9%/year. Finally, for high-end residential real estate segment and other segments, recommended rate is from 9-10%/year.

Orient and encourage the trend of issuing bonds to the public instead of issuing them privately; continue to strictly handle violations related to corporate bonds, deposit cancellation, and "double price" declaration in real estate transfers to both increase deterrence and ensure investors' rights, reduce budget losses; perfect the legal framework to protect investors in corporate bonds and fund certificates.

Finally, I recommend promoting the issuance of ownership certificates for tourism and resort real estate to secondary investors to quickly release tens of billions of USD in resources and stimulate the development of tourism and resort real estate on the basis of Decree No. 10/2023/ND-CP amending and supplementing a number of articles of the decrees guiding the implementation of the Land Law.

+ Thank you very much!

Viet Vu (Performed)

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