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| The real estate market is waiting for effective solutions to overcome difficulties. Source: Internet. |
“Breaking” the real estate market
In 2022, the real estate market recorded a series of difficulties. In addition to the inherent obstacles caused by major policies and orientations related to land law, investment procedures, and project legality, the market is also under pressure from inflation and bank and interest rates.
Notably, the impact of tightening policies on capital has significantly affected the market situation. Trading on the market tended to slow down, the market was quiet, and the liquidity was weak. According to data from the Vietnam Real Estate Brokers Association, the number of transactions is only 50% compared to 2021.
Facing the piling up difficulties of the real estate market, in order to make the real estate market healthy, the Government has been implementing many solutions. Regarding medium and long-term solutions, the State is focusing on implementing Resolution No. 18-NQ/TW dated June 16, 2022 of the Party Central Committee on “Continuing to renovate and perfect institutions and policies on improving the effectiveness and efficiency of land management and use, creating a driving force to turn our country into a high-income developed country” with a specific goal defined as “by 2023, the amendments must be completed. Land Law 2013 and a number of related laws, ensuring uniformity and consistency” to remove difficulties and legal problems of the real estate market.
At the same time, the Government has also issued a series of resolutions, decisions, directives and public notices to remove difficulties for the real estate market and housing development. Notably, the Prime Minister asked the State Bank to direct, coordinate and guide localities and commercial banks to lend and disburse loans quickly, with the right focus and right audience for businesses, real estate projects are eligible in accordance with the provisions of law; giving priority to lending to social housing projects and 19 banks have committed to reducing lending interest rates.
Supportive policies from the Government at this time have brought hope for the recovery of the real estate market in 2023 in the context that the demand for real estate ownership, especially the real demand is still very large and businesses have opportunities to restructure products and projects.
According to Mr. Hoang Quang Phong, Vice President of the Vietnam Confederation of Commerce and Industry (VCCI), 2023 is the year the National Assembly passes basic laws related to the real estate market: Law on Land, Law on Real Estate Business, and Housing Law will help remove legal bottlenecks, so in 2023 and the following years the market has many opportunities to develop in accordance with the investment cycle.
“The above moves not only contribute to ‘breaking the ice’ of the real estate market, returning liquidity, removing difficulties for real estate businesses, but also limiting risks to the economy, helping workers have the opportunity to access social housing. In the time approaching 2023, the recent drastic and continuous actions of the Government are expected not only to remove the bottlenecks for the market, but also to be a medicine to revive investor sentiment.
The market corrects in a more substantive direction
Assoc. Prof. Dr. Tran Kim Chung, former Deputy Director of the Central Institute for Economic Management, proposed three scenarios for the market in the near future.
In the first scenario, the market continues to correct in a more substantive direction. “This is the most likely option because in the context of cash flows, there is no sudden change; Policies are also not approved until the end of 2023. It is likely that the market will develop in this direction,” said Assoc. Prof. Dr. Tran Kim Chung.
In the second scenario, from a more positive perspective, the market has a new impetus because the three laws: Land Law, Housing Law, and Real Estate Business Law are officially revised. Besides, the market has more favorable factors when the world and domestic economic situation is stable, FDI inflows continue to pour into the market. At that time, domestic capital will be activated and absorbed to wait for a new upward cycle. The real estate market has crossed the concave point. However, Assoc. Prof. Tran Kim Chung said that this option can happen but the probability is low because there are many conditions beyond the ability of the Vietnamese economy.
In the third scenario, the world economy suffers and the domestic economy is affected simultaneously with the macroeconomy. The real estate market will go down due to the due debts, especially corporate bonds.
However, if there is no money to meet the interest payment and maturity requirements, the real estate market is forced to adjust down to restructure the market. According to Assoc. Prof. Dr. Tran Kim Chung, although this option is unlikely to happen, it is not impossible.
Besides the prospects, the real estate market is also forecast to face many difficulties and challenges. Prof. Dr. Pham Hong Chuong, Rector of National Economics University and the research team pointed out the difficulties that the real estate market will continue to face in 2023.
Accordingly, the market is still facing many difficulties in solving problems. In fact, the legal problem is the biggest one, accounting for 70% of the difficulties of real estate and housing projects in the process of preparing for investment, construction and business. The administrative procedures are complicated, with a lack of synchronization and connection, which prolongs the time to carry out procedures for real estate and commercial housing projects. At the same time, it is difficult to attract capital.
Increasing bank interest rates make capital costs increase, the number of real estate corporate bonds in 2023 – 2024 will mature in a large volume, which is a big barrier for real estate investment and development activities. Besides, difficulties in the market may lead to the market remaining quiet due to the psychology of waiting for the Government’s actions.
Up to the present time, a certain scenario for the real estate market in 2023 has not yet been formed, different outlines of the market picture in 2023 are based on the rotation of many economic factors in general, political legislation or capital inflows. Many people think that, although the real estate market has many prospects for recovery in 2023, the recovery still depends on the implementation of solutions to remove difficulties by the authorities as well as the initiative of the authorities.