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Low lending rates may stir real estate sales   2009-02-16 - VNS

An interest rate cut by banks has raised hopes of near-term recovery in the real estate market, according to experts.

"Since the basic interest rate dropped to 8.5 per cent, real estate transactions have restarted," says Lam Van Chuc, chairman of the Phuc Duc Company’s management board.

"So far this year, there have been some good signs. The Phu My Hung Joint Stock Company has sold all of its 133 apartments, while other companies, such as Tan Binh House Development and Nam Long, have also sold a lot products," says Le Hoang Chau, chairman of the HCM City Real Estate Association (HOREA).

Chau believes that when the Government’s stimulus policies come into effect, the real estate market will prosper. "The Government should consider real estate as one of its major stimulus channels."

Dang Hong Anh, chairman of the Sacomreal Company’s management board, thinks that the market might even recover earlier than expected.

"We believe that investing in real estate is much better than investing in the stock market. Therefore, this year Sacomreal will introduce luxury Phu My apartments with a total area of 50,000sq.m," Anh says.

According to real estate expert Nguyen Xuan Chau, the market will recover during the third quarter this year.

"Right now, many investors are seeking apartments priced at under VND1.5 billion (US$850,000)," he says.

"Investors are testing the low-interest policy," he adds.

Unpredictable market

Experts and real estate companies agree that macroeconomic policies need from three to six months to show their effectiveness.

"Real estate transactions are at their lowest level because investors have lost their confidence in the market after suffering through many changes in 2008. It’s hard to have a movement like we did previously when investors borrowed money from banks and put it into real estate. Additionally, real estate companies have to borrow money at higher interest rates because banks are highly vigilant of the market," Le Hoang Chau adds.

Dang Hong Anh also warns that banks will tighten their credit for low interest borrowers looking to purchase property.

"The market will improve little by little – there is no chance of a boom," he says.

According to some experts, due to the current unpredictable state of the real estate market, sellers are trying to keep prices stable, while buyers are waiting for a decrease. Therefore, macroeconomic policies may well decide the fate of the market, and low interest rates might prove to be an important factor in reviving it.

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