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On the mend

Released at: 16:54, 13/03/2015 Real estate in recovery

On the mend

The details may differ, but most stakeholders contacted by VET believe 2015 will see the real estate market continue on its road to recovery.

by Nguyen Quynh & Hung Khanh

The continued recovery of the real estate market was a welcome bright spot for Vietnam’s economy in 2014. Banks eased requirements on customers borrowing for real estate purposes, amendments to the Law on Housing and the Law on Real Estate Business seem to provide more foundations for the market’s development, and the government’s housing credit support package led to improved demand. It’s looking as though, for the most part, that 2015 will be another good year for the real estate market. VET sought the opinions of stakeholders on last year’s performance and what 2015 may hold. 

“In 2015, amendments to the Law on Housing and the Law on Real Estate Business will bring more opportunities to the market and will certainly make it more open for investors who would like to expand their business in the field. However, how players in the market actually react to the changes must also be considered. That is to say, the financial capacity of investors is also an important factor that will decide whether more advantages for the development of the real estate market will come or not. As a foreign investor, to be successful in Vietnam, an understanding of the country’s laws and policies is a truly important factor and this is why we always keep ourselves updated on these matters. In addition, when banks loosen requirements on individuals and businesses to buy, sell or invest in real estate it will bring more opportunities for everyone to become involved. This could also boost Vietnam’s economy to another level in 2015. The market in 2015 is expected to witness an increase in demand while supply will probably remain at the same level, which could lead to a competitive market and rising prices. We always try to provide the best quality services of global standard in our projects, working closely with banks and other partners to commit to long-term investments, contributing to Vietnam’s sustainable development by being one of the best real estate developers.”

Mr. Lee Jong Kook, General Director, Lotte Center Hanoi 

“We need to consider that Vietnam remains a frontier/emerging market from a real estate point of view and is therefore subject to shorter-term property cycles when compared to more developed markets and there are a number of different factors that can affect the market. The domestic and global economies are important to the success of the real estate market and at the present time the global economy still faces many challenges, including continuing sluggish conditions in Europe. In 2015 we expect to see the residential market continue to improve throughout the year. However, we note a word of caution against an increase in speculation creeping into the market. Foreign investors are becoming more bullish on Vietnam once again and we are receiving a high number of enquiries for good quality investment opportunities within the country. We anticipate 2015 will be a good year for investment transactions. In order for the real estate market to develop in 2015 and beyond we need to see a clear and effective action plan for all the non-performing loans held by the Vietnam Asset Management Company (VAMC) and banks. The property market remains somewhat stagnant due to the large number of non-performing loans and we would recommend a controlled auction process to start releasing some of these assets into the market. In addition, there is a long-term need for a land registry system that is available to the public to identify land ownership details and when the asset was last sold. Also, the introduction of clear international standards for the valuation of property is needed, with values adhering to guidelines issued by governing bodies such as the Royal Institute of Chartered Surveyors (RICS).”

Mr. Stephen Wyatt, Vietnam Country Head, Jones Lang LaSalle 

“The picture of Vietnam’s real estate market in 2014 was a little bit brighter. But many effects from five years of being frozen are still apparent. Some investors no longer have the capacity to continue with their projects, which have caused the number of delayed projects to increase by 50 per cent. Therefore, the wounds the property market has suffered will take a long time to heal. I believe that 2015 will be a year of recovery for Vietnam’s real estate market, due to the government’s stimulus policies and the amendments to the Law on Housing. These are important factors that will regain the trust of both domestic and foreign investors in the country’s property market. The mid-end segment, with apartments worth around VND1 billion ($47,000), is expected to remain the leading segment this year. Amendments to the Law on Housing allowing foreigners to purchase houses in Vietnam together with the thawing of the market should see the luxury segment showing promise this year. The proportion of low-end, mid-end, and luxury segments will be 50-25-25 per cent, I expect. Nam Long plans to restructure and promote merger and acquisition (M&A) activities this year. It will issue more 12,995 shares for stock swaps of subsidiaries, including Nam Khang, Nam Long ADC, and Nam Long DC, with the aim of creating liquidity and transparency. M&As will also help Nam Long acquire a lot of good land resources. It will also continue to replicate the EHome model, which was a major success in 2014, and create two new product lines to satisfy a variety of demands in the market.”

Mr. Le Minh Khanh, Director, Business Development Department, Nam Long Investment Corporation

“Vietnam’s real estate market in 2015 will see many positive signs due to housing demand being on the increase. Moreover, the economy in 2015 is expected to grow 6.2 per cent, and amended laws, such as the Law on Housing, the Land Law, and the Law on Real Estate Business, will create development opportunities. Many banks have also opened up their credit policies in a bid to support buyers to own property. This year Khang Dien will continue to develop the Mega product lines in suburban areas, because the Ho Chi Minh City - Long Thanh - Dau Giay Expressway is now open to traffic and cuts travel times from the Mega residential area to the city center to just ten minutes. Despite the positive signs, however, the real estate market will still face many challenges this year if government policies are not as effective as expected. Investors also need to pay attention to their financial sources and select suitable segments when promoting their investment activities.”

Ms. Ho Thi Minh Thao, Deputy General Director, Khang Dien House Trading and Investment JSC 

“Credit funds flowing into Vietnam’s real estate market are divided into two elements that increase supply and demand. Supply is represented by investors and demand is represented by households. The forecast from experts is that increases in credit growth in 2015 and the loosening of procedures and conditions for real estate loans will have a positive impact on the market this year. In the past, credit was too focused on supply (about 60 to 70 per cent of outstanding loans), which led to a market bubble. Credit growth policy this year is expected to focus on market demand, which supports families and individuals with real housing needs and will minimize loans for speculation purposes. Changes in policy aim to protect the interests of consumers but will also increase the cost of products, with investors having to be guaranteed by credit institutions to sell or rent houses, for example. In addition, land use fee increases lead to increased investment costs, which impact on buyers. 

The housing credit support package of VND30 trillion ($1.42 billion) only focuses on organizations who build social housing. Due to limited borrowers, loan terms and interest rates not being overly attractive, and the size of the package compared to the size of the real estate market being quite small, it won’t really lift the market. In 2015 I expect to see the implementation of the VND50 trillion ($2.38 billion) credit support package. From a business perspective I fully support this package and hope that it will be enough to provide momentum to market growth. It will resolve problems of bad debts, which the State and the banking system are actively addressing. Regarding our organization, the structure of our products will focus more on those with high liquidity, consistent with the majority of existing customers. Secondly, we will continue to invest in social projects and utilities serving the needs of people living in the urban areas and housing products of the Group. Thirdly, we will carefully select credit institutions with good reputation to support home loans to customers at good interest rates. Fourthly, we will fully perform after-sales activities, providing high levels of customer care and protecting their interests. Finally, we will complete and issue certificates of land use rights and ownership for 100 per cent of Nam Cuong’s customers.” 

Mr. Tran Oanh, Deputy Chairman, Nam Cuong Group

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