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Real estate to benefit from stimulation of demand
The measures issued by the government to stimulate demand will have positive impacts on the real estate market, said Dr Pham Sy Liem, Deputy Chairman of the Construction Federation.
How do you think the bank loan interest rate decreases will affect the real estate market?
In Vietnam and many other countries in the world, the real estate market is considered the ‘thermometer’ of the economy. It is because when the national economy heats up, the market also heats up, and vice versa.
In Vietnam the result of the eight measures, which has been applied by the government since the beginning of the year, is decreasing inflation. However, the national economy will continue growing, though the growth rates are expected to be lower than those of the previous years.
I think that the real estate market may see an upward trend early next year and recover by the end of next year. The announcement by the government about the measures to prevent economic recession in 2009 will also help it warm up.
However, to make this happen, it is still necessary for the state to focus on infrastructure development to create more jobs, and make heavy investment in low-cost houses in order to mobilise capital from people.
How will do you think the moves by the government will affect house and land prices next year?
When talking about house and land prices, it would be a blunder to apply the theory of developed countries in Vietnam.
Currently, real estate developers have been insisting on very high profit rates. The Ministry of Construction believes that the construction cost of apartments is VND12mil per sq m at the highest, but real estate developers are still selling at VND30-40mil/sq m. Sometimes investors get profit of 400%.
The high profit explains why real estate developers have not shifted to the low-cost house segment even while the market has been cooling down.
However, it is quite different in developed countries. Their solution in the crisis period is building low-cost houses. This will bring low profit to them, but in return for this, they will see rapid capital turnover.
In Vietnam, no one dares give up projects from which they expect high profit. Therefore, it is very difficult to forecast how land and house prices will be, also because of that reason. Besides, the speculation of some investors also makes it difficult to give forecasts about house and land prices.
But you said that you do not protest real estate speculation.
In fact, speculation is a normal thing in a market economy. If someone spends money, builds houses and then sells the houses, he is called a real estate developer. If someone buys houses from another person and then re-sells the houses, we call him a speculator.
It is a normal thing if the purchases and sales go in a normal way. However, it is harmful if the purchases of houses are carried out in a way that people purchase houses and wait for a chance to raise prices, pushing prices up to ‘virtual levels’.
The Ministry of Finance has set a plan to push up the disbursement for construction projects in 2009. Do you think that the real estate market will benefit from the plan?
This is really a good policy which other countries in the world always use to deal with economic recession. Of course, when receiving more capital, the national economy will perform better, which also means that the real estate market will benefit. If so, supplies will become more profuse, prices will be more reasonable, which also spells that demand will also increase.
TBKTVN
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