2019 was a tough year for the real estate market when many projects remained stagnant. However, the situation may be even more serious in 2020.
The overlapping and contradictory legal documents, complicated licensing procedures, unsuitable policies for social housing development, unclear legal framework for condotels and the decreased confidence of investors all have created a crisis in the real estate market.
The demand is very high, while real estate developers don’t have products to sell. A series of real estate projects have been frozen.
As a result, land and apartment prices have been pushed up. Meanwhile, real estate developers suffer as investment costs have increased. They have to pay more for bank loan interest rates. More seriously, they miss business opportunities.
Nguyen Tran Nam, chair of the Vietnam Real Estate Association, warned that the real estate market would meet difficulties in 2020 because of the problems in the legal framework, credit and capital safety.
“The bottlenecks in the legal framework cannot be settled immediately. Banks tend to tighten real estate credit and it will be more difficult to access land,” Nam said.
However, the problems of 2020 will be different from 2009-2010. At that time products were abundant but there were not many buyers, which led to high inventory level worth VND200 trillion. The figure has decreased to VND20 trillion.
“The crisis has shifted from oversupply to short supply, but the demand is very high and the cash flow is heading for the real estate market,” Nam said.
Sharing the same view with Nam, Nguyen Quoc Hiep, chair of GP Invest, said real estate firms are meeting difficulties because the spirit of the new laws still has not been enforced by state agencies.
The Law on Real Estate Business, the Planning and the Land Laws all have been amended with many changes related to land clearance, land use purpose conversion, auctioning and bidding. However, administrative procedures are still vague and overlapping.
Hiep thinks the real estate market in 2020 would still be quiet because of the lack of projects and new products.
The Hanoi authorities have recently changed the official land price frame in the city. As the land prices in all areas have increased sharply, real estate developers would have to pay higher for site clearance. Sales would also be difficult because of the high prices of products.
“The real estate price changes regularly because of the regular changes of the K coefficient. Before 2016, the land price accounted for 15-18 percent of the real estate product price, but now it accounts for 20-25 percent,” Hiep said.