Pumping capital into real estate ively

What projects to inject money into? 

Alain Cany, Director of Jardine Matheson Vietnam, said that the real estate projects which can meet the market demand now are office buildings for lease and apartments for middle-income earners, affirming that the demand for these products remains very high. 

Cany, who is also Eurocham chairman, said that real estate developers should especially focus on apartments with prices suitable for mid-income earners, instead of aiming at rich people as previously. 

According to Savills Vietnam, the business of mid-class apartments with the price of $750/sq m proves to be more successful in recent years in comparison with high-grade apartments. 

Also according to Savills Vietnam, in Q3, apartment sale prices have decreased by 5-25% over Q2. 

Ken Atkinson, General Director of Grant Thornton Vietnam, which provides consultancy and auditing services, said that the market needs to provide more offices for lease, 4-5 star hotels and premises for the retail industry, which is expected to develop well when Vietnam opens its retail market. 

Atkinson said that the demand for houses in Hanoi and HCM City would be quiet for the next 12 months, but lively after that. He believes that the market will bounce back as the cities will continue developing, therefore, pumping capital into real estate development projects is necessary in order to prevent demand from exceeding supply, which would, once again, cause a fever in the market. 

However, he has warned that banks should avoid providing loans for speculators and investors who do not have audited reports and transparent business. 

Banks should not be encouraged to provide loans

Brett Ashton, General Director of Savills Vietnam, said that it is not advisable to call on banks to loan to real estate projects. It would be better to allow them to decide when and for whom to provide loans to avoid risks.

He said that if banks are forced to provide loans for designated projects, loaning will become ineffective, and bad debt ratios will increase.  

High bad debt ratio would be a bigger danger than lack of capital, he said. 

According to the State Bank of Veitnam, outstanding loans for the real estate sector are estimated at VND61tril in HCM City, or 15% of the city’s total outstanding loans. 

Ashton said that the market itself will tell where money should be injected, and that currently, the real estate market is not an effective investment channel. 

Cany said that interest rates should not be lowered too quickly, since any sharp ups and downs will badly affect the market and the national economy in the context of the high inflation in Vietnam.