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Growth in property market stunted by lack of capital
The Vietnamese property market could reach its potential if more capital could be raised for the market, said a senior official.
“The capital shortage for both developers and buyers is one of several reasons that made the local real estate market frozen unexpectedly,” said Bui Pham Khanh, deputy minister of construction.
Khanh was speading at a conference organised by the Vietnam Real Estate Association in HCM City on Sept. 21.
Phan Huu Thang, head of the Ministry of Investment and Planning’s Foreign Investment Agency, urged real estate developers to seek more capital to prepare for the economic recovery, which could occur late next year.
Marc Townsend, managing director of property firm CBRE, told the conferences that foreigners were still committed to investing in the market thanks to the country’s growth through the financial crisis.
However, Townsend said the market would not return to the boom time of 2007 because the pressure from the global downturn was on owners, landlords and investors.
He also said the Government should encourage more transparency in administrative procedures, and if they did not, foreigners would refuse to do business in Vietnam .
A stable interest rate would help the industry and reduce risk as well, he said.
According to Pham Huu Phuong, head representative of the State Bank office in HCM City , the real estate market receives money from commercial banks and citizens.
“By late August, credit had reached 157 trillion VND (8.5 billion USD), an increase of 14 percent compared to earlier this year. That accounts for 11 percent of total loans provided by banks,” Phuong said.
However, the figure is small compared to the huge demand.
Le Chi Hieu, managing director of the Thu Duc House Corporation, said: “Real estate developers might increase capital, issue bonds, borrow money from banks or financial institutes, ask for deposits from customers, or set up joint-ventures with local and foreign partners and get money from a Real Estate Investment Trust, which still doesn’t exist in Vietnam .”
Thu Duc House has mobilised 500 billion VND (27 million USD) from the public by issuing bonds, borrowing 80 billion VND (4.3 million USD) from banks, and establishing four companies that are joint ventures with foreign partners.
“We have set up a real estate company in the US to take advantage of the financial crisis where we can buy houses at a low price,” he added.
Tran Duy Canh, lawyer and managing director of Luat Viet, said real estate companies should issue real estate bonds with the aim of securing money from partners when the project starts.
With real estate bonds, property buyers will have a chance.
“However, laws for issuing real estate bonds are strict and the project should be very attractive,” Canh said.
Ken Atkinson, managing partner of consulting firm Grant Thornton Vietnam said that having a long term loan was crucial for real estate developers. Developers should be careful with any short-term infrastructure development and, most importantly develop a mortage finance market for homebuyers.
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