The stagnation of the Vietnamese real estate market is expected to endure till Q2 or Q3 next year given a supply and demand mismatch, said economist Le Xuan Nghia at an event in Hanoi on Friday.
Unlike the property crisis a decade ago which was driven by oversupply, the ongoing crisis in Vietnam has been caused by undersupply. Developers, short of capital, have not been able to complete ongoing projects or launch new ones, Nghia said at a forum on Vietnam’s real estate market.
The local corporate bond market, which used to be a principal conduit for developers besides bank loans, came to a standstill following the arrests of several real estate tycoons over fraud. This situation developed into a confidence crisis, resulting in failed bond issuances.
Nghia added that domestic aggregate demand remains lackluster, indicating that the Vietnamese economy in experiencing a U-, not V-shaped recovery.
Collaborating with Nghia, Nguyen Quoc Hiep, chairman of the Vietnam Contractors Association, pointed out that up to 70% of troubles faced by developers are legal issues, mostly overlapping regulations.
Hiep explained that the real estate sector alone is directly regulated by 12 laws that include those on investment, planning and zoning, housing, and real estate business. Meanwhile, there is an absence of collaboration among ministries, and legal modifications often take time.
Hoang Hai, head of the Housing and Real Estate Market Management Department under the construction ministry, agreed that a large number of projects have been sluggish or stalled. The causes are mostly legal, particularly land pricing and zoning.
Hai said that dwindling supply and liquidity have worsened the real estate market. Prices have risen across all segments to new heights due to scant supply.
Panelists at the forum shared the view that boosting the supply of affordable housing could be a solution to the crisis.
Le Xuan Nghia, a member of the National Financial Monetary Policy Advisory Council, suggested the government set price brackets for this segment, learning from China’s experience.
In addition, developers need incentives to invest in cheap housing, with obstacles removed regarding profit caps and entitled homebuyers, Nghia said.
Tran Dinh Thien, a member of an economic advisory group to the prime minister, proposed actions to recover confidence among investors, businesses and consumers. Among them, the government should consider bolder measures to revive the real estate market, while the finance ministry needs to share the financial burden with the central bank.