Land prices feed market volatility

High prices is one of the major contributors to Viet Nam’s volatile and uncontrollable real estate market which posed great challenges to meeting low income housing needs, property experts have said.

Deputy Minister of Construction Nguyen Tran Nam said it was a disadvantage for property prices to be too high and added that the property market had special features which were different from other commodity markets.

The challenge for authorities was to figure out how property prices could be adapted to rising incomes and benefit businesses while still meeting social demands.

A survey of major cities revealed that property prices were too high when compared with average incomes and exceeded the real value of the property. High prices had also made a huge impact on solvency, the survey found.

Land experts attributed the high housing prices to increased input costs and greater demand for housing. But the key reason was that property prices were floating freely, they said; investors often decided selling price themselves, and people were willing to pay, which pushed property prices higher.

Nam said the increase in land price also stemmed from many other reasons such as currency devaluation, decreases in share prices, unstable prices of gold and the foreign currency market. In this context, many people moved their investment portfolios to real estate which resulted in increased housing prices, especially in Ha Noi, he said.

Speculation and the herd psychology had also contributed to pushing up property prices while volatile and unscientific planning and forecasting had led to numerous problems. The tax policy could not regulate speculation which caused the irregular increase in housing prices, he said.

Dao Trung Chinh, deputy general director of the Department of Land Administration under the Ministry of Natural Resources and Environment said, there were both objective and subjective reasons for the high price of real estate. Objective factors included global price fluctuations and economic instability while one important subjective factor was the issue of planning.

“We need to identify how many units are required for low-income earners in a given location and make a plan to expand eonomic development in that area. If the development is not feasible, land and housing will become scarce and prices will rise. This problem will never be solved without transparent information on land and housing as well as planning,” he said.

Chinh also said there had been an inaccurate accounting of real estate transactions because of unregistered sales when buyers and sellers did not want to deal with cumbersome administrative procedures. The underground transactions were unregistered, meaning in a dispute buyers could lose their land, and the State had lost money, he said.

To control the property market properly, good and close co-ordination between authorities was needed for planning, information systems, tax policies and anti-corruption.

To solve the problem, authorised agencies should continue to concentrate resources on promoting the development of commercial housing and social housing programmes so as to increase supply. Stronger inspections and prompt responses to land and housing investment violations were also needed, he said. — VNS

Tags: Vietnam land prices