Oversupply chokes property market
HA NOI (VNS)— Loan defaults and high inventories were the greatest challenges facing the real estate market in the nation's major cities in the coming year, Viet Nam Real Estate Association general secretary Phan Thanh Mai told a conference held here this week.
|The Van Quan apartment blocks are reflected in a lake in Ha Noi. The real estate market is facing challenges from loan defaults and an oversupply of properties. — VNA/VNS Photo Bui Tuong
"Property developers are faced with a number of difficulties, including bad debts and high inventories, caused challenges not only for themselves but for businesses in related sectors, including construction and building materials," Mai said.
Property firms have been one of the sectors seeing the biggest decline on the stock market this year and the lowest business results, he added. By the end of the third quarter of this year, developers in the nation's two leading cities of Ha Noi and HCM City had found buyers for only 5-7 per cent of a total of 115,000 unsold apartment units, he said.
Bui Tat Thang, director of the Ministry of Planning and Investment's Research and Development Institute, forecast that, by the end of this year, several real estate firms would retreat from the market altogether due to a lack of capital.
Thang suggested that the market might recover if the Government had proper policies on gold and overseas remittance. The country received about US$10 bilillion per year in remittances and imported about 500 tonnes of gold, worth about $28 billion.
"If we could mobilise these reserves, the real estate market would heat up again," Thang said.
However, Do Thu Hang, head of Savills Viet Nam's research and consultancy department, said it would take five years for Ha Noi to reduce its enormous inventory of unsold apartments.
More loan defaults were imminent, Hang said. Statistics from banks showed that bad debts in the real estate sector had totalled VND117 trillion ($5.6 billion) by late May, a bad debt ratio of 5 per cent. Meanwhile, the State Bank of Viet Nam has set the figure at VND202 trillion ($9.6 billion), or 8.6 per cent.
To ease the difficulties, HCM City Real Estate Association chairman Le Hoang Chau suggested policies to encourage people to buy apartments by providing favourable conditions for accessing credit and allowing foreigners to buy apartments in Viet Nam.
The head of the State Bank's credit office, Tran Van Tan, said restructuring the market and settling bad debts were also key issues for the banking sector next year.
Tan said that banks would continue to lend to social housing projects and project already under construction, but that further development in the high-end and office segments would be strictly controlled.
He urged banks to take measures to help heat up the real estate market, e.g., converting short-term loans to mid- and long-term loans to help investors and home buyers avoid defaults. — VNS