Experts call for transparency in property market

Experts at a seminar reviewing the real estate market after Vietnam’s WTO entry in Hanoi Friday (26-12) said foreign investments in this sector have increased greatly. With the country lacking funds to modernize, the increase of foreign investment in property has been an important contribution to upgrading infrastructure and improving urban environments.

All tall buildings and five-star hotels in the major cities are partly or wholly owned by foreigners, which has helped develop tourism and attract foreign investment in other fields. Foreign investment in hotels, resorts, industrial parks and tourism areas have also helped create jobs.

The rapid increase of foreign investment in the property sector shows Vietnam is a safe and favorable destination for investment and has much potential. However, massive property investments have led to wild speculation, virtual prices, and increases in loans. It has also led to the dominance of building offices and high end houses with insufficient attention to providing low cost housing.

Foreign investment in property might lead to trade deficit as investors have to import construction materials for development projects.

 Shortcomings

The Vietnamese real estate market is very attractive but also very complicated.

Experts noted difficulties with licensing, administrative procedures, acquiring land rights and capital withdrawal procedures. The lack of transparency and overregulation has stemmed property development. During 2008, property transactions have decreased with prices falling 20-50%. In addition to the global recession, internal factors such as excessive land prices, poor stock market results and tightened credit for property projects have led decline of the real estate market.

Solutions

Noting the importance of capital to restore the market, former Deputy Minister of Natural Resources and Environment, Dang Hung Vo, pointed to investors rushing to pay bank loans while property prices decrease and few successful deals are made.

Experts said for 2009 it is necessary to deal with unpaid loans and adjust property prices to reasonable levels in accordance with the country’s socio-economic conditions. For the long term, they said measures to manage the real estate market should be adopted to make it more open and transparent, and to curb wild speculation.

Experts said the government’s decision to allocate VND2.5 trillion ($147 million) to build low cost housing next year, along with Ho Chi Minh City ’s support for workers’ housing, will help resolve a financial standstill in the property market. It will also ensure social security and reduce difficulties for low income earners, they said.

The Viet Nam Real Estate Association has submitted a number of solutions to the government. These include a proposal to permit project owners to receive advance capital from investors in order to handle capital liquidity issues.