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Real estate market in choppy waters: experts

By Vu Le   June 13, 2022 | 05:36 pm PT
Real estate market in choppy waters: experts
Real estate projects in HCMC's Thu Duc City. Photo by VnExpress/Quynh Tran
Lack of capital, speculation and legal and liquidity issues are challenges the real estate market will face in the second half of 2022, experts have warned.

Both the primary and secondary markets saw trading plunge in the first half, and new supply has been dwindling due to legal troubles, they said.

Property developers and homeowners have also been facing difficulties in getting funding since banks tightened credit in April.

Huynh Phuoc Nghia, a senior consultant at advisory firm GIBC, said the capital market for real estate has been narrowing this year after bond issuances too have become difficult following the government’s orders to the central bank to monitor them closely.

Meanwhile, regulators are considering limiting short-term loans to the sector to ensure medium- and long-term funding for other sectors.

Nghia said real estate is basically a race for capital, and so any financing volatility would strongly impact market sentiments.

He called on firms to consider alternatives like investment funds, mergers and acquisitions and joint ventures to diversify their capital sources and reduce risks.

Plaguing speculation

Tran Du Lich of the government’s Economic Advisory Board warned against land speculation in many Vietnam's localities of 2022.

Current housing prices are too high for end users, and instead companies and speculators are rushing to grab them, he said.

He pointed to the skyrocketing land prices in rural areas in the central region as speculators push them out of most workers’ reach.

A member of the Vietnam Banks Association said this also poses risks to lenders, who, if not cautious, would struggle to liquidate real estate assets given as collateral due to falling demand.

Legal hassles

Neil MacGregor, director of consultancy Savills Vietnam, said legal entanglements are a major issue for the market.

The Law on Land and Law on Construction overlap, making licensing tortuous for both foreign and domestic investors, he said.

The Law on Planning, which came into effect in 2017, causes further headaches to investors due to its lack of clarity, he said.

He called for addressing these problems to reduce legal overlaps and simplify the approval process, thus providing access to more lands.

Can Van Luc, a member of the National Financial and Monetary Policy Advisory Council, said legal problems have stalled the real estate market.

He cited a preliminary survey as saying over 260 resort projects, worth around VND680 trillion (US$29.31 billion), face legal obstacles and have yet to receive licenses.

Legal issues would continue to plague the resort real estate market for at least the next six months, he said.

Surging prices, dwindling liquidity

A VnExpress survey found that liquidity has been falling in both primary and secondary property markets.

In the primary market, sellers and buyers are concerned with the tightening of bank credit. In the secondary market, many people are selling at losses after not being able to handle the loan burden.

Consultancy DKRA reported that sales of new apartments in the first quarter in Ho Chi Minh City fell by 68 percent quarter-on-quarter to 1,385 units, the lowest in a year.

Experts agreed that the sector should focus on resolving capital, legal and supply challenges to be ready for the year-end peak season.

 
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