Deputy Minister of Construction Nguyen Tran Nam tells VET's Hoang Thu about efforts to create sustainable development in the real estate market.
What do you foresee for Vietnam’s property market in 2015, given that 2014 ended with a number of signs pointing towards recovery?
Vietnam’s economy is expected to continue to recover in 2015. Along with this, many new policies such as the amended Law on Housing and the amended Law on Real Estate Business, which were passed at the recent eighth session of the 13th National Assembly and contain many significant innovations, will come into effect. These factors will strongly affect the real estate market in general and the housing market in particular.
Among others, specific policies and provisions relating to housing investment and development, especially social housing, as well as the loosening of regulations permitting foreigners to buy and own houses and land in Vietnam, will continue to positively impact the real estate market in 2015.
Inventories are expected to be cut in the near future. High sales rates will be seen in projects with a good location, well-designed apartments, and sound construction progress. However, the pace of inventory reduction will be slower than in previous years because existing inventories are mainly concentrated in projects far from the CBD, with incomplete infrastructure and large-sized apartments.
Merger and acquisition (M&A) activities will tend to increase. Enterprises faced with difficulties in the past will participate in M&A deals and adjust their projects to make them more in line with market demand. Foreign investors will also eye projects that have stalled rather than seeking to introduce their own new projects.
This year the market may see the resurgence of projects previously delayed by the economic crisis. New projects in favorable locations will also begin construction, to meet demand. Credit for real estate activities is expected to increase and real estate is still forecast to be an attractive sector for foreign direct investment (FDI).
More and more affordable apartments that meet demand and affordability will be launched in the near future. Customer confidence will also gradually recover.
The official land price for prime locations in Hanoi and Ho Chi Minh City increased significantly recently. Will the adjustment impact on housing prices and investment activities?
On November 14, 2014, the government issued Decree No. 104/2014/ND-CP on the land price framework. Under the Decree, land prices in certain locations in Hanoi and Ho Chi Minh City were doubled, to a maximum of VND162 million ($7,800) per square meter.
The adjustments ensure that the land price framework is appropriate to market prices, to guarantee the rights of residents if the land was to be reclaimed by the State. They also bolster State budget revenue and help local authorities manage their land resources more effectively, as land use by developers and tenants will be considered more carefully than previously. Real estate projects will therefore be developed with appropriate planning and developers can use financial resources in an effective manner.
The adjusted prices will also impact on most investment sectors, including real estate business and investment. It is certain to affect the psychology of residents and investors and even increase the real estate price in certain projects, at least initially.
However, the higher land prices do not always increase the housing price, which are usually affected by many other factors. Compared with 2010 and 2011, land and house prices in many areas and projects are now much lower but the land price determined by the State is higher than in those years.
Housing prices around the country are lower than in the past but are still high when compared to average incomes and neighboring countries, because of high costs and speculation.
If the State’s policies are implemented practically then the market will be more transparent and absent speculation, making real estate prices more stable.
The amended Law on Housing permits foreigners to buy houses and land in Vietnam. What do you think will be the impact of this policy on the market?
The amended Law on Housing contains articles relating to housing ownership by foreign individuals and organizations and their rights and obligations.
But there are also restrictions. Foreigners are only permitted to purchase in commercial housing projects in areas where they are allowed to reside and a renewable leasehold of 50 years applies.
The law also limits the number of houses foreigners can purchase, and stipulates that payment must be made through credit institutions that are operating in Vietnam.
The Ministry of Construction (MoC) believes the law will contribute to attracting investment and mobilizing capital resources while also guaranteeing national security and defense.
What major challenges will the real estate market face in 2015? What solutions does MoC have for resolving these difficulties and leading the market towards greater sustainable development?
At the moment there is a lack of apartments of small size, low price, and favorable location. But it will take a long time to restructure larger apartments and increase the amount of affordable housing to meet the needs of most people.
Shortcomings that have remained unresolved for many years continue to have a negative impact on the real estate market. There are still projects with slow construction progress, as their developers lack capital for completion. Demand for social housing in urban areas and housing for workers at industrial zones is extremely high but capacity remains limited.
To promote sustainable development in the real estate market, MoC will coordinate with other ministries in building a complete legal framework. It will focus on the following solutions this year.
It will cooperate with other ministries to focus on institutional improvements in the management of construction investment, urban development, housing development, and the real estate market.
In the short term, it will prepare and submit Decrees and Circulars that guide the implementation of the Law on Construction, passed by the National Assembly at its 7th session, and the amended Law on Housing and amended Law on Real Estate Business, so that such Decrees and Circulars are synchronous and come into effect on July 1, 2015, which is also the date of effect of the two laws.
MoC will continue to direct localities to strictly implement these laws and related documents in order to ensure that the laws are applied in a practical manner.
It is cooperating with banks over the efficient implementation of Government Resolution No. 61/NQ-CP dated August 21, 2014, on amendments to and supplementation of Resolution No. 02/NQ-CP, with a view to overcoming the difficulties facing the market and real estate enterprises and meeting the housing needs of low-income earners and the beneficiaries of social welfare.
It also directs localities in implementing Directive No. 2196/CT-TTg dated December 6, 2011 from the Prime Minister on solutions to bolstering real estate market management. It will review and classify existing real estate projects to decide which will continue with their construction and which will be stopped or adjusted to satisfy market needs.
MoC will also strengthen the development of social housing and create the conditions for the simplification of procedures in the preparation, appraisal and approval of social housing projects.