Real estate market: weakening but not falling to pieces

One of the solutions to stabilize the real estate market is to diversify the housing structure, according to experts.

Many real estate projects have seen prices falling sharply as people hope that housing land prices will follow a downward trend.

However, experts argued that the real estate market remains in a fix but it is not falling to pieces.

Under increasing pressure

Never before have real estate developers been put under such great pressure as at present. Judging from rising land prices, interest rates, and construction costs, many are unwilling to go ahead with their projects for fear of suffering losses as the purchasing power has reached saturation point and housing prices are going down.

In addition, there is a serious shortage of capital. Many banks have refused to lend money to real estate developers.

So, it seems rather difficult to improve the liquidity of the real estate market in the short run. Especially, after the Government issued Resolution 11 on reducing public investment, it has become all the more difficult for the real estate market, especially luxury apartment and basement segments, to grow with a new lease of life.

Many experts hold that credit policies for the non-production sectors, especially for the real estate sector, have failed to prevent price “gauging” in the real estate market. This is due to the fact that while real estate developers cannot access bank loans, small housing developers find it easier to borrow money from banks.

Good business strategy needed

A sharp decrease in the liquidity of the real estate market is the prime concern of not only real estate developers but also the credit system. Many experts are worried about the breaking of real estate bubbles. Nguyen Manh Ha, head of the housing management department under the Ministry of Construction, notes that during crunch time, real estate developers often suffer losses as they cannot withdraw their capital. In his view, if there are bubbles in the real estate market, only small investors will be at risk as big investors can easily sell their products. So to speak, the real estate market is weakening but not falling to pieces.

To help real estate developers out of difficulties, the Ministry of Construction has proposed that the Government devise solutions to stabilize the market and make it become more transparent. One of the most important solutions is to diversify the housing structure as the strategy for real estate developers is not suitable. While the housing demand of average and low-income earners is growing large, it’s paradoxical to see up-market apartment buildings rising to serve a small section of people only.

The Ministry of Construction has also proposed that the Government and the State Bank of Vietnam should be flexible in real estate and credit policies. But, in Ha’s opinion, real estate developers should have a good business strategy commensurate with the market trend in favour of average income earners. – VOV

Tags: Vietnam Property market, Vietnam property sector, vietnam real estate market