A seminar on revitalizing Vietnam’s property market co-organized by Cushman & Wakefield June 13 discussed various measures to renew the stagnant market.
Addressing the event, deputy minister for Planning and Investment Dang Huy Dong said the Vietnamese government was seeking to deal with the country’s economic difficulties and the government’s Resolution 02 introduced important measures to help resume the stability and growth in the property market.
Then, the State Bank of Vietnam has presented many measures to uphold the market, paving the way for low-income people to buy houses. Among them, property was removed from non-encouragement fields. In May, the central bank for the second time this year reduced the prime interest rates to help banks to further cut down lending rates. Some banks have launched low-interest credit packages.
The four State-run commercial banks – Agribank, BIDV, Vietcombank and VietinBank – have slashed their lending rates of their old loans to below 13 per cent.
Meanwhile, the State Bank has just introduced a VND30 trillion ($1.4 billion) credit package to lend state employees, people in the armed forces and low-income people to lease or buy social housing and commercial housing which is below 70 square metres and costing at most VND15 million ($720) per square metre, as well as corporate customers engaged in building social housing or commercial housing converted into social housing. The package’s lending rate is 6 per cent per year.
Sacombank deputy CEO Phan Dinh Tue said his bank was not among the lenders in the government package but he thought it was a positive move to support the market. He said Sacombank early this year launched a VND1,600 billion ($76.5 million) housing loan package, and has disbursed VND1,350 billion ($64.6 million) to 240 clients.
Chris Brown, general manager of Cushman and Wakefield Vietnam, said widen opportunities for distress assets were being seen now in the market.
The reason, according to him, is Vietnam’s real estate market has been stumbling. The lack of capital resources pushes many developers to unable finish or continue their projects. Many developers have to restructure their portfolios to focus on their core and important projects. Therefore, this is high time for new arrivals and strong developers to find ways to take over distress assets.
Brown said some commentators have suggested that real estate could make up over 70 per cent of non performing loans in Vietnam. However bad debts and their assets have not been available for investors to acquire openly from banks or investors at this stage.
“The situation is toxic and unless both banks and investors move quickly to deleverage then the recovery will be a lot slower and more painful. There are clear signs of distressed property assets all over Vietnam. It is just a matter of time before they come to the market,” said Brown.
He said the newly-established Vietnam Assets Management Company’s budget was very limited compared to NPLs. Meanwhile, NPLs are not attractive to investors at the book value as the reality is they have decreased the loans by 30-40 per cent.
Like him, Prof. Dang Hung Vo, former deputy minister for Natural Resources and Environment, said the NPL problem must be solved first.
A fact is banks are not required to disclose their NPLs.
An idea at the seminar was Vietnam should make it easier for foreigners to buy housing in the country. Deputy minister Nam said the Vietnamese government started to allow foreigners to buy housing in 2008 with very strict requirements, and making it easier needed time. He added this October, the National Assembly would consider for approval proposals already made to make it easier. He said he was leading a group that made the proposals.
Participants said they expected the National Assembly would act rapidly towards the issue.
Another problem in the market was land pricing was very high, said Brown. Replying, Dr. Vo said Vietnam should change its land tax policy to reduce land pricing. Vo added due to high land pricing, property pricing was many times higher than the levels the market could accept. However, it takes time to cut land pricing by changing policies.
According to deputy minister Nam, the government is now concentrating efforts on its national housing development strategy. To that end, the Ministry of Construction (MoC) has urged localities to scale up construction of social housing projects to gradually meet people’s demand. A total 157 social housing projects are now in the development pipeline nationwide with 68,500 apartments altogether, including 58 social housing projects earmarked for low-income people with more than 33,000 apartments, and 99 social housing projects for workers with 35,500 apartments.
Some large-scale social housing programmes underway now are ones located in Binh Duong province developed by Becamex IDC, in Dong Nai province by the MoC’s IDICO, in Hanoi by the MoC’s HUD, and many other projects in other provinces and cities.
Nam said property market problems would be gradually addressed in the coming period when the National Assembly approves the amended Corporate Income Tax and amended Value Added Tax, with diverse tax incentives and when the government’s $1.4 billion credit package begins to be disbursed.
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