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Real estate market continues to encounter difficulties
For lack of capital resources banks have recently refrained from providing loans for projects in real estate and other sensitive areas, which positively helps to dampen speculation, said Prof. Dr. Dang Hung Vo, former Deputy Minister of National Resources and Environment.
Mr Vo made these comments during an interview granted to a VOV reporter.
Reporter: In your opinion, will the real estate market be frozen in the future?
Mr Vo: This depends on the implementation of solutions to curb inflation. While the global economy is suffering from a recession, the national economy is facing a shortage of investment capital. The domestic real estate market is on a decline as commercial banks have increased the deposit interest rates. In my opinion, capital resources will be hard to come by at least in the next one and a half years. To cope with the situation, it is essential to complete the necessary policies to prevent speculation. What if the real estate market will pick up with speculation remaining intact, I think the result will not be worth its due.
Reporter: Are there any effective measures to deal with speculation?
Mr Vo: There are many things we can do. The main focus will be on renewing the tax on land use. The Government has asked the Ministry of Finance to compile and adjust the revised ordinance on tax and land use. I mentioned this measure several years ago. Many domestic and foreign experts have also raised this issue. The tax is always an effective tool for regulating profits on the market, limiting imaginary demand and breaking “bubbles” that drive up prices in the real estate market and create over-speculation.
Reporter: As from January 1, 2009, foreigners will be allowed to buy houses in Vietnam. How will this impact on the real estate market?
Mr Vo: The National Assembly’s resolution specifically makes clear who can buy houses and how they can buy houses in Vietnam. Accordingly, foreigners are allowed to buy houses for daily use only. This is a reasonable policy in the integration process as it has a positive impact on the real estate market. We can be fully capable of making good both land-use and housing planning.
Reporter: Recently, as the cost of construction materials went up but land prices fell, many investors complained about making a big loss. Is it true?
Mr Vo: If we want to know the truth, let's make some calculation. For high-rise apartment buildings: the price for 1sq.m of land is around VND500,000 - VND2 million and the price of construction materials is VND7-8 million while the price for 1sq.m of a high-grade apartment building is around VND20-30 million. Judging from these figures, they might complaint because they had to pay for invisible expenses or what they could not talk about and maybe because they were just on the fiddle to seek support from the State.
Reporter: Currently there is a high housing demand for State employees and poor people. Why are investors not interested in building houses for these people?
Mr Vo: One reason is poor management. Businesses only want to invest in upmarket project to make a higher profit than in houses for workers. Therefore, the Government should have policies to encourage investors in the field by providing preferential loans and tax exemptions. On the other hand the State should help labourers to rent houses or buy them at preferential prices.
Reporter: Thank you very much.
VOV
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