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Domestic real estate developers have land but no money
Experts say that a lot of problems still exist in the real estate market, and that the lack of capital proves to be the biggest thing hindering the development of the market.
Truong Thai Son, Deputy General Director of Hoang Quan Real Estate Corporation, pointed out the three biggest problems of the real estate market.
First, the market is still a fledgling market with insufficient components and few transactions. Moreover, a lot of ‘real estate products’ are still not considered commodities.
Second, there exists a big gap between supply and demand. The national market economy is now developing strongly, and the demand for real estate is increasing, but supply is becoming scarcer.
Some people mistakenly think that the real estate market is now freezing because of oversupply and low purchasing power. In fact, demand still far exceeds supply. The market is now lackluster because of the overly high prices of land and apartments, which prove to be unaffordable for the majority of Vietnamese people.
Third, most transactions in the real estate market are ‘underground’ transactions. Experts have estimated that underground transactions now account for 70% of total transactions.
Underground transactions have been a headache for the state as it cannot control actual transactions and cannot collect taxes from the parties in the transactions. People also do not want to make underground transactions because they cannot regularise their assets. In many cases, their interests cannot be protected by the laws.
Meanwhile, according to Pham Thanh Hung, Director of The Ky Price Appraisal Company, the biggest problem of the real estate market is the lack of professionalism of domestic real estate investors, 90% of the total investors in the market.
Hung said that a lot of investors are not professional in regards to marketing activities, always break commitments and provide low-quality products for the market.
According to the General Statistics Office, there are some 1,700 real estate firms with the average capital of VND80bil each, a very low level if compared to the capital of real estate firms in the world. The capital for real estate development projects in Vietnam has been sourced from the state budget, loans provided by financial institutions or commercial banks, capital mobilised from the public, and from foreign investment.
The part of the state budget reserved for accommodation development proves to be very modest, with VND100-200bil spent every year. Meanwhile, the capital from financial institutions proves to be limited as banks are tightening real estate credit in an effort to help curb inflation.
As planned, from now till 2020, Vietnam needs 1,300mil sq m of accommodation, or 16mil apartments. If the average price for every sq m of medium-quality apartment is VND1.6mil, Vietnam will need the huge sum of VND2,000,000bil, or $130bil.
VNN
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