Removing real estate 'bottlenecks'

To achieve the socio -economic development goals set for 2023, continue to stabilize the macro-economy, control inflation, promote growth, and ensure major balances of the economy, one of the important tasks is to develop synchronously, safely, healthily, and sustainably all types of markets, including the real estate market.

This is the content emphasized in the National Scientific Conference "Vietnam's Economy in 2022 and Prospects for 2023: Stabilizing and Developing the Real Estate Market" organized by the National Economics University NEU on the morning of April 21, 2023.

Opening the workshop, Deputy Head of the Central Economic Commission - Dr. Nguyen Duc Hien said: One of the bottlenecks that need to be broken through in 2023 to promote economic growth is the real estate market. If the real estate market is well resolved, it will help to improve the monetary and capital market, develop related industries such as cement and steel, and at the same time create a large number of jobs.

economic growth real estate development picture 1 — Deputy Head of the Central Economic Commission - Dr. Nguyen Duc Hien said that one of the bottlenecks that need to be broken through in 2023 to promote economic growth is the real estate market. Photo: Ha Linh

Need to promptly introduce stimulus and debt relief policies

Reality shows that the Vietnamese real estate market needs to solve major problems, which are: there is a gap between supply and demand of commercial housing and social housing; Real estate prices are still high and lack control and regulation; Many real estate businesses are facing financial difficulties.

In the first quarter of 2023, the number of newly established enterprises operating in the real estate sector decreased sharply (in the first quarter of 2023, there were 940 enterprises, down 63.2% compared to the same period in 2022), in addition, the number of enterprises dissolved or temporarily suspended business was 341 enterprises (up 30.2%) and 1,816 enterprises (up 60.7%) respectively compared to the same period last year; In the first quarter of 2023, about 30% - 50% more trading floors had to close or temporarily suspend operations compared to the previous quarter, and it is estimated that the number of brokers currently operating is only about 30% - 40% compared to the beginning of 2022.

Liquidity pressure in the real estate market remains a major risk to Vietnam's economy in 2023. Business cash flow at the end of Q4/2022 has declined sharply, interest payment capacity is low, debt repayment capacity has declined while bond maturity pressure is high, and businesses' main capital channels still face many difficulties...

According to Fiin Group's report, real estate is the industry with the second highest bad debt ratio of bonds at 20.17% after the energy industry (63.1%). In particular, real estate corporate bonds currently have a circulation scale of more than VND 396,300 billion, accounting for 33.8% of the total circulation value.

As of March 17, 2023, 69 issuers with 1 or more outstanding bonds were unable to meet their debt obligations with a total value of VND 94,043 billion, accounting for 8.15% of the value of outstanding corporate bonds. Of these, 43/69 were real estate enterprises with a total value of corporate bonds with overdue debt payment of VND 78,900 billion, accounting for 82.6% of the total value of corporate bonds of enterprises with overdue bond payment.

Currently, in many localities, especially Ho Chi Minh City, Hanoi , Khanh Hoa, Da Nang, there is a large backlog of real estate projects that need a special mechanism to handle after inspection, examination and judgment conclusions; if handled, there will be a huge resource to contribute to promoting growth for 2023.

Macroeconomic data for the first quarter of 2023 show that risks to economic growth, employment, and the stability of the credit institution system in 2023 are quite high.

According to Deputy Head of the Central Economic Commission - Dr. Nguyen Duc Hien, in the context of the unfavorable world economy, Vietnam needs to promptly introduce stimulus policies, extend debt, as well as create conditions for businesses, especially real estate businesses, to mobilize capital through issuing shares.

Dr. Nguyen Duc Hien also pointed out the positive point, which is that currently the risks to inflation and exchange rates are quite low. Therefore, loosening monetary and fiscal policies to the level of the 2020-2021 period is completely feasible.

And according to Dr. Hien, due to limited domestic resources, maintaining macroeconomic stability and promoting business environment reforms to attract foreign investment flows are essential for the recovery process of businesses, especially real estate businesses.

Tightly control "hot" growth in asset markets

“The Vietnamese real estate market witnessed a land fever from the beginning of 2021 until the first half of 2022 (the fourth land fever in the development cycle, mainly in the speculative segment). However, in the second half of 2022, the market quickly declined and became quiet,” said Prof. Dr. To Trung Thanh (NEU).

Prof. Dr. To Trung Thanh said that NEU's 2022 Annual Vietnam Economic Report has the theme of Stabilizing and Developing the Real Estate Market. The report said that the demand for real estate is still very large (due to stable economic growth, rapid urbanization and infrastructure growth) but the supply is not enough to meet the demand (especially products with suitable prices), the transaction rate is low, and the market's absorption capacity is weak.

Real estate prices increased sharply in the first two quarters of the year and gradually decreased towards the end of the year. Real estate prices are still higher than people's ability to pay. The real estate market has seen a wave of loss-cutting due to the impact of financial policies and macroeconomic factors of the economy. The real estate market is having a spillover effect on the financial system, the risk of bad debt is increasing. Consumers do not have access to suitable housing sources, affecting social security.

And the real estate market is also facing many policy risks. That is, the Regulations on land valuation methods are unclear and lack basis, leading to difficulty in determining market prices, so authorities and businesses face many difficulties in implementation.

Or the regulation that real estate transactions are not required to go through the floor has created a legal gap - this is the basis for the formation of "ghost projects" and cases of customer fraud.

The workshop discussed solutions and policy recommendations to resolve difficulties in the real estate market, to prevent the real estate market from becoming a factor causing high inflation and a “bubble” economy, and to effectively control investment capital flows into the real estate market to combat speculation, but also to avoid causing shocks, freezing the real estate market, causing negative impacts spreading to the credit institution system and social life.

First of all, it is necessary to perfect the legal system. Perfect the policy to control and prevent real estate speculation: use tax policy tools to regulate income from the use and transfer of real estate to the State Budget and indirectly regulate real estate speculation behavior.

In addition, it is necessary to have solutions to adjust supply and demand, increase information transparency and open up capital sources for the real estate market. Credit room for the real estate sector should be expanded at a reasonable level, consistent with the financial capacity of credit institutions and the monetary and credit management solutions of the State Bank. - Issue lending criteria for different types of real estate.

But it is also necessary to strictly control the "hot" growth in asset markets. Control the money supply into the real estate market and direct the cash flow of the banking sector into the real economy, the spillover sector by selectively controlling credit into real estate. And strictly control credit risks for corporate bond investment activities, potentially risky areas such as investment, securities trading, and the real estate sector.

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