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How to get property market on the move   2008-12-29 - VNS

 Local experts believe harmonious settlement of relations between the financial and real-estate markets would help mitigate threats to the national economy.

At a seminar held in Hanoi on Friday, experts painted a bleak picture of the property market during the year. Transactions declined even though prices dropped by 20 to 50 per cent. In addition to the effects of the global economic crisis, there were internal factors, such as excessively high land prices, the stock market recession and, in particular, tightened credit.

Rushing to pay

Noting the need for capital to restore the market, former Deputy Minister of Natural Resources and Environment Dang Hung Vo said investors were rushing to pay their bank loans while property prices were falling.

In the long term, they said the real-estate market should be made more open and transparent to resist speculation.

According to experts, the Government’s decision to allocate VND2.5 trillion (US$147 million) to build low-income housing next year, along with HCM City’s support for workers’ housing, will help dissolve the financial standstill in the property market.

The Viet Nam Real Estate Association has suggested the Government remove obstacles hindering the development of the property market, including a proposal to permit developers to receive advance capital from investors to create cash flow.

Participants at the workshop said that in late 2006, real estate recovered after three years of cooling down. The market warmed up rapidly after Viet Nam joined the WTO because of a sudden increase in foreign direct investment.

Great demand for industrial zones, housing, hotels and high-end apartments sped up the real estate market in 2007.

In addition, successful stock-market investors shifted their money into real estate. Between 2006-07, land prices in Viet Nam skyrocketed, especially in big cities. Hotel prices also doubled against 2006. The cost of leased office space also became expensive.

The 2007-08 period was the best time for real-estate investors. But since April this year, the market slipped after the Government required relevant ministries and agencies to focus on implementing eight solutions to curb inflation. This included adjusting the credit interest rate of commercial banks to solidify their money reserves.

The lending interest cap of 12 per cent was changed and credit institutions continued to raise the lending interest rate, making it difficult for investors to obtain loans. As a result, the real-estate market became frozen.

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