| Real estate market could rally by 2009-end |
| Written by Administrator | |
| Wednesday, 18 February 2009 | |
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Only by the end of 2009, will the real estate market be able to recover. Although demand for real estate is very huge, the real estate transactions are difficult to be conducted because the speculators offered virtual prices. Le Hoang Chau, chair of the HCM City Real Estate Association (HoREA) said the deep drop in the real estate prices in the southern hub has placed many businesses into very difficult situations while offering development opportunities for strong businesses. According to the central bank-HCM City branch, HCM City-based real estate businesses are accounting for up to a half of the total capital of banks across the country. Total capital of real estate businesses amounts to some 61 trillion dong, making up 15% of the total outstanding loans in the city. By October, the cities reported only 151 projects in-progress due to the capital shortage. Banks committed to lend them 14.388 trillion dong, of which 9.320 trillion dong was disbursed. Chau said that many real-estate businesses in HCM City are now very difficult because of many reasons including capital shortage, stagnated market, high lending interest rates, lending maturities and highly increased prices of construction materials. The basic interest rate that the central bank has recently cut to 11% a year remains too high because those real estate businesses still borrow loans at an interest rate of 16% a year. They are unable to borrow loans to develop new projects and are continuing to complete existing projects and construction works. Duong Thi Bach Diep, director of Bach Diep Duong Co., Ltd, said that real estate brokerage centres in HCM City are working in an indifferent manner. Vietnam's real estate market has many real estate speculators without or with little ownership equity. Previously, they had speculated on condominiums and project lands and hoped to earn high profits after selling them. However when real estate prices slashed [real estate prices are now equal to only 30-40% of previous prices], they received into problems. If they sell land, they will suffer heavy losses. Meanwhile, if they do not sell land, they will have to pay loans with high interest rates. Such a manner of real estate trading will surely lead to bankruptcy. Although non-performing loans account for only 2.5% of the total real estate outstanding loans, according to a report by a research team of the Harvard University and the Fulbright Economics Programme in September, by the end of this year, huge amount of real estate loans will have to be entitled to another 0.08-0.09% of initial lending interest rates. Therefore, there will be possibly a wave of bankruptcy of businesses. It is reported that HoREA has proposed that the central bank and the city's people's committee set some measures to rescue the real estate market. Accordingly, HoREA has asked the government and the central bank to continue to reduce the basic interest rate so that real estate businesses can borrow loans with monthly interest rates of 0.85% -1.1%. HoREA also suggests that banks should extend lending durations for businesses, restructure loans and offer more medium and long-term loans to them. HoREA proposed that a special finance fund of some 10 trillion dong should be established to support banks and real estate businesses. Real estate businesses should be allowed to raise capital from clients if their projects are approved, HoREA said. According to HoREA, businesses also should be allowed to transfer projects and the government will collect taxes for each transfer and others. Not all real estate businesses face difficulties. Many businesses including Thuduc House are still developing projects including projects located abroad. Clearly, this is a good opportunity for strong real estate businesses to acquire real estate at low prices. Diep said that the reduction of real estate prices mainly focus on condominiums and projects that are located on the outskirts. Meanwhile, inner city lands and good-positioned lands always have high prices. Diep and many other real estate-industry businesses said that only by the end of 2009, will the real estate market be able to recover. Vietnam's real estate market has just been developing, home demand is very huge. The current difficulty is only temporary, said Chau. |