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Policies aim to keep land affordable
Viet Nam's real estate market plays a major role in the country's socio-economic development. However, land prices in some areas have increased much more than their true value, while the number of transactions has remained modest. Viet Nam News reporter talked with Nguyen Van Minh, general secretary of Viet Nam National Real Estate Association about the issue.
What is your assessment of Viet Nam's real estate market over the last few years?
It would not be appropriate to compare the market's growth rate with other sectors in the economy. However, in comparison with other countries, the market has been developing well, although it underwent difficulties.
It has made a significant contribution to the country's growth, especially since the Government approved the Land and Real Estate laws. The laws created a legal framework for investors and the public to access to real estate products.
Over the last 15 years, almost all cities and provinces have undertaken urban development planning, thus clarifying a common and long-term plan for investment in urbanisation and the real estate market.
The potential of the real estate market remains great.
The country's real estate market was pretty quiet in the first half of this year. Why was that?
Following the Government's presentation of the Ha Noi masterplan for development until 2030 with a vision to 2050, the capital's real estate market and neighbouring areas went through a boom period. Under the master plan, the core urban centre would be linked with five satellite urban areas and other towns in the surrounding rural areas.
The core urban centre was suggested to consist of an east-west axis along the Thang Long, Highway 32, Lang-Hoa Lac Highway and Highway 6. Of which, the Thang Long axis will connect with Hoang Quoc Viet Road, Highway 21, West Lake and Ba Vi areas. It will become the main traffic axis in the transportation corridor.
The national political centre would also remain in Ba Dinh District. Land has been set aside for development of the Government and administrative offices in Ba Vi until 2050. And the national administrative centre will remain around Hoan Kiem Lake.
However, the plan was not approved, and the market began to readjust to the realities of the situation. In HCM City, land prices in some areas also dramatically increased in the month following the speculation in the capital; and presently, the real estate market is returning to its real value and transactions are increasing.
However, in reality real estate prices are said to be too high. What do you think about this?
We always hope that real estate prices will remain affordable and offer more opportunities for people to buy their own homes.
In reality, this won't happen in the short term. Moreover, it requires co-operation between the State, investors and homebuyers. Real estate will only return to their real value once the three stakeholders equally benefit.
The State needs to provide proper policies, especially regarding land use rights and procedures to reduce unnecessary costs while investors should try to apply technological advances to reduce house prices. Home buyers have been offered many preferential policies including medium and long-term mortgages as long as they have a deposit of ten to 20 per cent of the real estate's value.
So what subjective factors contributed to the high prices?
Some areas were affected by subjective factors. For example, there was land speculation in Ba Vi as part of the east-west axis of the Thang Long, Highway 32, Lang-Hoa Lac Highway and Highway 6 routes. Although it was only a proposal and was waiting approval from the National Assembly, speculators rushed to buy land in the area, and overheated the market. As soon as the State sent the plan back for consultation, the market returned to its real value.
Ha Noi will develop a new land price framework next year with an aim to make it reflect the reality of the market. Will the new price framework contribute to fuelling increased real estate prices?
Following Decree No 69, all issues of land investment and land use money, not only in the capital, paid for by the Government must be based on real market value. If market price recognised by the Government at the beginning of the year increased less than 20 per cent, it will be re-evaluated at the end of the year.
In order to complete major infrastructure development, the Government will need to carry out land clearance and pay current land and real estate owners compensation. The decree stipulated that the property owner would receive compensation based on real market values, compared with previously when the Government offered compensation based purely on land use designation.
This new form of compensation could see real estate prices increase.
What is your assessment of the estate market in the second half of the year?
The changes in the market have shown that it is focusing on average house segments. The Government has policies to develop social housing and housing for students and low-income people. Many investors have registered to take part in such projects. I think that these will account for a large market share. It is expected that there will be many more houses available to meet this demand in the remaining six months of the year.
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