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Ministry asserts control over property market
The Construction Ministry has submitted a series of proposals to Prime Minister Nguyen Tan Dung that aim to achieve better control over the domestic real estate market and promote healthy practices.
One of the proposals is that the Prime Minister introduces a list of criteria that would limit lending for luxury real estate projects.
The ministry has also suggested the establishment of a compulsory housing savings fund that would be a policy instrument allowing low income families to access credit to buy decent properties.
It has also asked that the sale of land plots and incomplete houses in housing development projects in urban areas be blocked.
Housing developers should be held responsible for completing houses before handing over them to buyers, the ministry suggests.
According to Construction Minister Nguyen Hong Quan, the domestic real estate market in 2010 and the first months of this year has shown signs of recovery, but its development was still unstable, with property prices, particularly housing, at high levels.
A recent survey showed that housing prices in major urban areas were much higher than most people could afford, Quan said.
An inspection of 18 housing development projects at new urban areas in Ha Noi also found out that the ratio of housing that was actually occupied was very low, particularly of villas and attached houses in localities far away from the downtown area. This indicated that a lot of property purchases were speculative in nature.
Meanwhile, many property developers have said they would delay selling their housing products and wait for new price levels.
The owners of many apartment projects said their input costs have increased sharply while market liquidity has remained low due to a lack of capital.
Le Tan Hoa, director of the Lilam Construction Investment Joint Stock Company, said real estate market liquidity was very weak because interest rates were very high and the central bank was implementing a policy to reduce lending for non-manufacturing sectors.
The Hoa Binh Real Estate Trading and Construction Joint Stock Company had co-operated with a Singaporean partner to develop an apartment project in HCM City's District 2. The venture has already completed laying the foundation and constructing sample houses, but it has not announced its sales plan, and is biding its time till prices improve.
Rising costs
Since the beginning of the year, input costs for apartment projects have risen sharply with construction material prices going up by at least 20 per cent, according to HBC deputy director Le Quoc Duy.
Duy said he believed that a new price level would be created in the apartment market in the coming time because of the sharp increase in input costs.
Apartment sales in another project of his company in District 8 had also been suspended pending a new price level, he said.
For similar reasons, the Hoang Anh Gia Lai Joint Stock Company has delayed its plans, originally set for last month, to sell units at its Thanh Binh, Incomex and Phu Hoang Anh apartment projects.
HAGL Director Le Hung said the company had to delay the sales plan because it wanted to establish a new price to avoid losses.
For a long time, Duy of the HBC said, many real estate project owners have had to accept reduced profits and even be ready to take losses by offering low prices for their products so that they could mobilise capital needed to develop their projects. They had to do this because of difficulties in accessing bank loans, he said.
But now, they cannot afford any more losses and have to think of increasing their selling prices, he added.
Tran Kim Minh, Chairman of the Executive Board of the Transport Engineering Construction and Business Investment Stock Company, agreed with Duy.
He said his company has just decided to increase the selling price of apartments in its project in Binh Chanh District to between VND12 and 13 million after two years of maintaining them at VND8 and 10 million per square metre of housing floor.
Nguyen Xuan Loc, General Director of the Techcomreal Company, also said that selling prices of apartments would start increasing shortly and a new price level would be established in the local real estate market as more projects increase their rates.
However, the pricing changes are more likely to take place in apartment projects with average rates that have higher demand than luxury real estate products, he said.
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