Economic stimulus plan aims to warm up realty market

One of the 1 billion USD package’s five stimulus measures launched early this month is to build housing for low-income families and intensify investment in infrastructure development in rural and mountainous areas.

To that end, the State should focus on building infrastructure, thus providing jobs for people. Low-price housing projects should be given priority so that idle money from people can be mobilised, Liem says.

Sharp cuts in both deposit and lending interest rates have been good for warming up the real estate sector.

Like other countries in the world, real estate is a “thermometer” of the economy. It’s warm when the economy is growing, it’s cool when the economy is slowing.

Liem said the economic growth rate fell, but remained above zero as inflation reduced thanks to Government efforts.

But even when the real estate sector improves, real estate prices can not be forecast. Liem blames the situation on investors’ dream of big profit from real estate trading.

A square metre of residential houses set for sale by the Ministry of Construction is as high as 12 million VND but investors still sell for 30-40 million VND per square metre, Liem says, adding that real estate investors sometimes earn a profit of as much as 400 percent.

Such super profits have kept investors close to the real estate trade and they refuse to offer low cost housing even when the market declines.

This situation is different in developed countries where real estate investors have policies suitable to the downturn of the economy. They turn to low-price housing projects that bring in low profits but quick working investment, Liem says.

In addition, the property speculation by a group of people waiting for the recovery of the sector also makes it difficult to forecast prices.

Due to this year’s inflation, urban property prices have declined by 30 percent, according to the Ministry of Finance.

Prices of high end buildings fell by 20-30 percent, land plot and villas by 30 percent. Trading is still busy in housing worth under 1 billion VND and small floor space apartments.

The Finance Ministry blamed the problems on unhealthy trading on the unofficial market where investors only focused on high level housing which accounts for jut 5 percent of the housing market. When the Government tightened credit policy to curb inflation, these investors rushed to sell out their properties, pushing supply far above demand and prices plummeted.

According to a recent survey conducted by the Research and Advisory Real Estate Company VietRees, more than 90 percent of leading property experts believe in the future development of the sector but couldn’t predict when. They said: “The property sector itself does not have any big problems, it will happen in compliance with the stability of the financial market and national economy.”

According to the Hanoi ’s State Bank of Vietnam, property outstanding loans in the first ten months of this year increased by 23.5 percent compared with the later months of last year.

Of the total 246 trillion VND outstanding loans, 24,840 trillion VND have been lent to the real estate sector. Bad debt is at 0.9 percent, still under the minimum investment adequacy ratio.

Source: VNA