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Optimism abounds about recovery in real estate

Released at: 07:36, 12/06/2015

Optimism abounds about recovery in real estate

Mr. Tran Ngoc Quang, General Secretary of the Vietnam Real Estate Association (VNREA), spoke with VET about the recovery of the real estate market.

by Huyen Ngan - Hoang Thu

■ Along with the recovery of the real estate market the number of newly-established real estate enterprises has been on the rise. What are your thoughts on this?

The real estate market has been exhibiting signs of a sharp recovery. Many enterprises also target earning big profits this year despite failing to reach their business targets last year. This demonstrates the degree of optimism among businesses in the market, which also encourages new entrants to become involved.

The number of real estate enterprises established in the first quarter of this year was 50 per cent higher than in the same period last year. In my opinion this is good news not only for the real estate sector but also for the national economy, given the market experienced a long-lasting crisis.

According to insiders, there are two major reasons for the rise in the number of newly set up real estate enterprises.

Firstly, investors rushed in to set up new businesses because they felt encouraged by predictions that the real estate market would heat up this year, along with indications of significantly improved homebuyer confidence in the market and the high sales recorded in different segments.

Many companies also accelerated their establishment because the amended Law on Real Estate Business will take effect on July 1. Under the amended Law enterprises who seek to be involved in the property business must have legal capital of no less than VND20 billion ($920,000) instead of the current VND6 billion ($275,280).

The influx of businesses is sure to create fierce competition in the market. Under pressure from giants that have advantages in financial resources, experience, reputation, and branding, these newcomers require special business strategies to survive and grow.

Many banks are offering loan packages for real estate developers and homebuyers. Does this create any risks to the financial system and the real estate market?

There is a shortage of capital resources for real estate projects in Vietnam, which to date have largely relied on banks loans. So when the property market goes up, higher demand for lending in the sector is perfectly natural.

Many banks have been more aggressive in launching attractive mortgage packages to homebuyers in addition to lending to developers. However, to prevent risks to the financial system as well as to the real estate market, the government should design or develop other capital resources for real estate projects in addition to bank loans.

The government should also be careful in regulating market movements in order to prevent a property bubble from reappearing.

What are your thoughts on the disbursement of the VND30 trillion ($1.38 billion) housing stimulus package so far?

Many people have been concerned about disbursement progress but have forgotten what its original targets were. The package aims to boost market liquidity and partially resolve the shortage of housing for low-income earners.

To date the package has achieved its basic goals even though it has only disbursed around 30 per cent. The credit package also creates more opportunities for low-income earners to own a home, which contributes to social security and improves people’s lives.

The loosening of regulations for accessing the credit package, making it easier for homebuyers to access preferential loans, will not contribute to any increase in bad debts as banks will carefully consider all applications before providing loans.

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