The price to pay for opportunistic business

Real estate giants rush to launch luxury housing, ignoring affordable housing:

Real estate stagnation could drag down the whole economy

After a brief boom in 2021, the real estate market has been going through a very difficult period since 2022. Businesses, even large investors, are short of cash, seriously lacking liquidity and facing the risk of mass bankruptcy.

According to a report by the Ho Chi Minh City Real Estate Association (HoREA), in 2022 alone, more than 1,200 real estate businesses went bankrupt, many projects stopped construction, contractors had no projects, no jobs, and workers lost their jobs. In addition, many businesses reduced their workforce by 30% - 50%, and the brokerage force decreased by up to 70%.

Talking to reporters, Dr. Can Van Luc - economic expert commented: The real estate market is currently experiencing an unusual phenomenon. Because, while the macro economy is growing very well, real estate has reversed and is almost "frozen". Mr. Luc pointed out that there are 5 main reasons leading to this phenomenon.

Firstly, after 2 years of rapid growth, the world real estate market and Vietnam will enter a period of adjustment. This is the law of the market.

“In 2 years of hot growth, world real estate prices increased by an average of about 10% - 20%, while in Vietnam they increased by about 20% - 50%,” said Mr. Luc.

Second, Vietnamese real estate is facing many legal problems that have not been resolved in a timely manner. A report by HoREA shows that legal problems account for 70% of projects, many projects have been shelved for many years, unable to be implemented due to legal problems, leading to the phenomenon of investors "dying on a pile of assets" .

Third, capital sources have narrowed over the past year, including credit capital and capital from mobilization channels such as stocks or bonds.

Fourth, many consecutive violations have occurred, causing investor confidence to decline and market liquidity to decrease rapidly.

Finally, it is related to the supply-demand relationship that makes prices unreasonable. Particularly in the Ho Chi Minh City market, from 2017 to now, the number of houses on the market has continuously decreased, in 2017 there were nearly 43,000 units, decreasing by 20% each year, by 2021, the number of houses on the market was only 13,000, in 2022 there were only more than 12,000 units, continuously decreasing and there is a phenomenon of imbalance between supply and demand and product structure.

According to the report of the Ho Chi Minh City People's Committee, in the two years 2021 - 2022, the whole city has 47 completed projects with 28,000 apartments put on the market. Most of them are mid-range apartment products and do not meet the development needs of the city. Mr. Bui Xuan Cuong - Vice Chairman of the Ho Chi Minh City People's Committee admitted: "We will adjust to resolve the imbalance between supply and demand, which is currently tending to skew towards the mid-range segment".

Among these causes, Mr. Luc believes that the legal environment with many bottlenecks is the biggest difficulty. Many regulations are overlapping, inconsistent, unclear, not guided, removed promptly, and not suitable for reality...

“While there is a clear fear of responsibility, fear of mistakes, and shirking of responsibility among a number of civil servants, many projects cannot be implemented, or the implementation time is prolonged, they cannot be sold or transferred, cannot be mortgaged, or have difficulty paying rent...; leading to abandonment, inventory, waste, expense, and loss of trust...” , Mr. Luc emphasized.

Agreeing with this opinion, Prof. Dr. Hoang Van Cuong - National Assembly delegate, Vice President of National Economics University said that the real estate market makes an important direct contribution to economic growth and has a spillover effect on the development of many industries and fields in the economy.

"Therefore, when the real estate market stagnates, it will lead to a series of economic activities being stagnant, which will pose a risk of stagnating growth and even leading to recession," said Mr. Cuong.

The price to pay for opportunistic business

In addition to the above factors, the real estate market is facing the risk of having an excess of high-end housing projects with sky-high prices, while affordable housing projects are hard to find.

According to the report of the Ministry of Construction, in the current housing product structure, 78.2% is high-end housing, the rest is mid-range housing. The affordable segment is almost "extinct" .

Experts say that investors are racing to enter the high-end housing segment to maximize profits. Because the profit margin of high-end housing is often 3 to 4 times higher than that of affordable housing.

However, when the market is saturated, the high-end housing segment is not aimed at the majority of consumers, leading to the phenomenon of "in shortage, there is surplus" . And of course, when the products are not sold, investors face a situation of illiquidity.

Emphasizing this, Dr. Le Xuan Nghia - member of the National Monetary and Financial Policy Advisory Council said that land is a rare resource, housing is an essential need, Vietnam needs to build real estate policies on this foundation, cannot let speculators buy real estate, buy resources to hoard, turn it into huge profits in the future, while people's needs are not met.

Therefore, Mr. Nghia emphasized that businesses must give up the habit of opportunistic, unprofessional business practices that lack international reach.

“I would also like to have a few other opinions, one is to abolish the social housing mechanism and build a new mechanism for housing for low-income people; second is to tax housing speculation; third is that local authorities must decide on compensation prices for land according to market prices at that time...” , Mr. Nghia suggested.

Recently, in the National Online Conference "Removing and promoting the safe, healthy and sustainable development of the real estate market" , Prime Minister Pham Minh Chinh emphasized that: Real estate businesses must be responsible for themselves, solving difficulties caused by themselves due to inaccurate forecasts, poor market development, ineffective capital investment... Restructuring segments, reasonable prices to promote liquidity, towards profitable but harmonious business.

“When business is profitable, it must be offset by when business is at a loss. We cannot always be profitable. We cannot demand profits even when facing difficulties. No one will hold our hands until night or sleep with us until morning. We must contribute to the common good,” said the Prime Minister.

According to the head of the Government, another important task is to ensure the legitimate rights and interests of customers, while strengthening propaganda and guiding customers to choose good and suitable products, contributing to the safe, healthy and sustainable development of the market.

In the near future, the Government will have a separate project on housing development, housing for workers and low-income people. The Government will consider and report to competent authorities for consideration and decision. At the same time, the Prime Minister requested to organize effective, accurate, timely communication work, objectively, honestly and accurately assess the situation, avoiding false information.

The Prime Minister affirmed that no one is bailing out anyone in order to remove difficulties and promote the safe, healthy and sustainable development of the real estate market. The Government will soon issue a Resolution, but based on their functions, tasks and powers, the subjects must immediately carry out the work to effectively implement the set goals, tasks and solutions.

Viet Vu

Source: https://www.congluan.vn/cai-gia-phai-tra-vi-kinh-doanh-chop-giat-post236423.html