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Real estate prices to continue decreasing: expert   2009-04-01 - VietNamNet/VnMedia

Professor Dr. Dang Hung Vo, a senior real estate expert, believes that the real estate market will continue to remain quiet in the time to come, while the foreign direct investment (FDI) into the sector will not be as high as expected.

 

Real estate firms have been complaining about the freeze of the real estate market. Do you think that their complaints are reasonable?

 

Professor Dr. Dang Hung Vo, a senior real estate expert, who was once the Deputy Minister of Natural Resources and the Environment

I think there is reason in what they say. The real estate prices have dropped by 70% on average over the price levels in early 2008.

At this moment, only those who have real demand for accommodations make purchases, while those who just want to buy houses to keep as the fixed assets do not make a move, as they expect the prices to drop further.

Real estate developers complain also because they have the debts that have become matured, or because they find it get to access bank loans. Meanwhile, the credit interest rates have been escalating to very high levels, sometimes at 20% per annum which proves to be unsuitable for real estate investment.

 

Do you think that the real estate prices have reached the floor price levels?

 

Not yet. The prices need to drop further. The floor price is the price we can define after considering the market conditions. For example, the land price of the areas where apartments are located is about VND 1 million a square metre, while the construction cost is about VND 4 million a square metre for popular apartments.

 

What should we do to force the market real estate prices to the floor prices?

 

The real estate prices in Vietnam remain high because of unreasonable tax scheme which I think is a problem that needs to be fixed. The current tax scheme prompts speculation, which pushes the prices up to overly high levels. If the speculation does not exist, the real estate market will operate well.

 

 
The tax scheme needs to be designed in the way so that people cannot make speculation. We should not tax those who have only one apartment, but we should tax heavily on those who have idle houses.

 

However, it is very difficult to find out those who have more than one house or apartment.

 

In fact, the current real estate registration system allows us to control this. Besides, I believe that the policemen in every ward know well who have houses but don’t live in the houses.

 

If you have VND 500 million, will you be able to purchase a house?

 

I can. I saw people purchasing houses with that sum of money in resettlement areas.

 

The problem now is that people lack information about the real estate market. They have to seek information themselves rather than relying on official sources.

 

What is your forecast about the real estate prices in the time to come?

 

I don’t think that we can settle the problem of capital shortage overnight. In fact, we can use a part of the Government’s demand stimulus package for the real estate market development, but the sum of money does not make sense, which cannot be high enough to meet the demand for capital of real estate developers. Meanwhile, the foreign direct investment into the real estate market will also decrease as the result of the economic recession.

 

As such, I think the real estate market will continue decreasing and prices will keep sliding. Those who do not have real demand for houses should delay their purchase plan, as the sliding of the market will continue.



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