The market will change for the better

Yip Hoong Mun, Deputy CEO of CapitaLand Vietnam talked with Saigon Times over the implications of the resolution 11 for his business and the property sector

The Government’s Resolution 11 – which is intended to tame inflation, stabilize the macro economy and safeguard social security – has apparently produced certain results since it came out on February 24. Reporter spoke with Yip Hoong Mun, Deputy CEO of CapitaLand Vietnam, over the implications of the resolution for his business and the property sector as a whole.

What do you think about Resolution 11?

- Yip Hoong Mun: It was a good move to ensure that in the near future, investors would regain their confidence in the Vietnamese dong and be more willing to invest in housing and property projects. Government policies always have a strong influence on the residential and real estate markets.

What would be the long-term implications of the resolution for your business?

- Resolution 11 would positively change the market and serve a useful purpose in benefiting our residential projects by providing for a more healthy business and financial economic environment. The improving business environment will continue to make Vietnam an attractive destination for our investment, which will create growth for us while providing increasing opportunities in the long term.

And for property and real estate businesses in general?

- The tightening of credit policies combined with slower growth resulted in a general reduction in demand from the various real estate sectors as buyers had more challenges obtaining credit and developers had trouble financing their projects. The clear and good direction of Resolution 11 will thus assist the real estate market in recovering quickly from difficult times and the implementation of Resolution 11 will directly and positively impact consumer spending and the confidence in the business of commercial real estate.

During difficult economic times, there is a decrease in demand for products and services, especially for durable goods such as property. How can your company cope with this situation?

- With the decrease in gold trading and the accelerating inflation, the property market remains the most stable form of investment. Our company has introduced CapitaValue Homes which is aimed at building good value homes targeted at mass market homebuyers and young executives whose mortgage capacity to purchase a home is estimated to be no more than 40% of household income. This has created a platform to put people who previously could not afford to own homes, into homeownership, especially during these difficult economic times.

What is your most pressing strategic challenge right now?

- This year, the residential home market is anticipating a significant new supply of units with a strong desire for affordable segment property projects. Recent trends show that many people are beginning to avert the risk of the depreciation of the dong by investing in property and with competition between developers in both HCMC and Hanoi increasing. So our most pressing strategic challenge right now would therefore be to differentiate our projects from those of the mass market and continually seek and invest in good projects and land while simultaneously balancing economic challenges such as inflation and currency depreciation. I foresee that this challenge is only a short term phase, which I am confident we can overcome.

Do you still foresee any challenges ahead?

- The Vietnamese economy is facing a credit crunch that has a high interest rate. If this situation continues for a prolonged period of time, many projects in the high-end and luxury categories will be affected. Furthermore, many purchasers who are genuinely interested in purchasing properties within the mass market segment may have difficulty financing their investments. This situation is not healthy for the long term development of the real estate market in Vietnam, and it is essential for us to look into ways to overcome this challenge.

What would be the biggest risk for private investors who want to buy property right now?

- Risk varies depending on whether you are a property speculator looking into short term gains or a long term purchaser intending to purchase property for personal residence. However, overall investor demand is influenced by short term economic changes such as monetary policy, general market sentiment and the performance of alternative investment channels.

Currently, there is an excess of high-end and luxury residential housing units although there is a lack of end-user demand. However, in the sectors of low and affordable housing for the middle and lower income segments, the demand for affordable housing supersedes the supply of currently available housing. Moreover, the current lack of developed and established infrastructure and transportation facilities in new residential developments are not favorable for buyers who want assured accessibility of residential and commercial development projects.

What kind of change do you want to see most in the business environment?

- The complicated and long drawn procedures coupled with uncertain development parameters could result in a prolonged development timeframe and a high land price that produces a non-constructive environment which in turn reduces investor confidence in the property and real-estate sector. Actually, I would like to see changes in these areas. -SGT

Tags: vietnam stock, Vietnam stock market, VNindex