Dec 24, 2012

Vietnam - Frozen real estate market needs comprehensive solutions

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Over the past two days, cabinet members had working sessions with leaders of Vietnam’s two biggest economic hubs, Hanoi and Ho Chi Minh City to discuss on the current frozen real estate market.

The move aims to collect facts and figures of the market so that the government could take proper measures to deal with the current dilemma.

Official statistics show that the volume of unsold apartments is huge, with 14,490 apartments worth VND24,500 billion in Ho Chi Minh City. Meanwhile Hanoi has inventory of nearly 5,800 apartments and 3,483 semi-detached houses.

The paradox is that housing prices are extremely higher than the average income levels of the majority of people. Speculation and high interest rates have also made the problems worse.

In Hanoi, the housing transaction volumes quickly boomed during a short period of time, sending wrong signal of the real demand and market capacity and making it the lucrative field for enterprises to flock into.

Besides, the structure of real estate is also imbalanced as many enterprises only focused on building high-quality and spacious apartments while social housing projects for low-income groups and workers are slowly carried out.

In addition, financial and credit policies defining the real estate market still contain shortcomings and administrative procedures on planning, investment, land, site clearance and compensation remain inappropriate.

Minister of Construction Trinh Dinh Dung said the capital city’s housing prices are much higher than in Ho Chi Minh City but fewer small- and medium-sized enterprises engaged in the market.

Regarding measures to unfreeze the market, Chairman of Hanoi Municipal People’s Committee said the city would cut down on supply and stimulate demand through creating favorable conditions for needy people to buy houses.

Hanoi also proposed lowering value-added tax for first-time buyers, lowering interest rates and establishing financial stimulus packages.

Both cities stressed the need to expand social housing constructions, adjust real estate structure, or transform commercial housing projects into social ones to better feed the real demand.

During both working sessions, PM Dung said that the government would deliberate on the real estate market at the cabinet’s regular meeting at the end of this month and a specific resolution will be adopted to deal with the current dilemma.

Comprehensive solutions are essential in the coming time but all should be patient with gradual recovery of this sector.


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