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Real estate in hcmc has many potential risks

real estate in HCMC

Recently, in the reports and proposals submitted to the relevant authorities, Ho Chi Minh Real Estate Association has repeatedly warned about the risks of the real estate market as well as expressed concerns about over 500 projects being suspended in Ho Chi Minh City. Mr. Le Hoang Chau, Chairman of Ho Chi Minh Real Estate Association shared with the Vietnam Economic Times and Realestatevietnam on this issue.

Ho Chi Minh City Real Estate Association commented that the dark side of Ho Chi Minh City real estate market is that more than 500 projects are being suspended. Is there any solution to this situation, sir?

According to the statistics of the relevant authorities, the inventories of real estate in Ho Chi Minh City are about 5,000 billion dong. However, the number of projects checked for new statistics on over 40 projects out of 1,200 projects in the city.

Suspended projects are actually the icebergs of the inventories leading to investment capital waste and land resources are not included. The projects were stopped mainly due to the mortgage of the bank, obstacles in the ground clearance, limited capacity of the investor.

In order to solve this situation, Ho Chi Minh City Real Estate Association has repeatedly proposed to amend the Law on Real Estate Business, considering the transfer of the project, the transfer of part of the project is the normal business operation between investors.

A positive news is that the National Assembly has just passed a resolution on handling bad debts of credit institutions, which is effective from August 15, 2017 will contribute to healthy credit operations, effectively handle the financial assets that are mostly real estate will create additional resources for the economy and help re-launch mortgaged projects that have been suspended for many years.

In addition to the number of suspended projects, the Association also regularly warns about the risks of the real estate market. Would you please tell us the foundation for these warnings?

On the overall basis, there are still potential risk factors such as the demand-supply phase deviation, mainly deviated from high-end real estate segment, resort vacation; banks’ credit capital and social capital (mainly of homebuyers) pour into the real estate market is huge, which tends to deviate from some large firms and into high real estate segment, resort vacation;  At the same time there has been an increase number of  secondary business investors; While the supply segments of the social housing, trading housing which are both affordable and high liquidity is not enough.

The real estate market is not yet transparent, healthy and sustainable due to five blockages: 1 – Blockage of land use fees is the burden, unknown which creates “ask-receive” mechanism;  2 – Blockage of site clearance leading to many unfinished compensation projects, unable to deploy, buried capital of enterprises in the long time without solution; 3 –  Blockage of transfer of real estate projects; 4 – Blockage of inappropriate credit policy which does not create medium, long-term capital source for the real estate market; 5 – Blockage of many prolonged, negative containment, harassment administrative procedures during the process of calculating land use fees, or approval and implementation of investment projects using land.

What do you think about market movements in the last months of 2017?

The real estate market will remain in the growing period, but will continue to slow down compared to 2016. Forecasts for 2017-2020 period, we will see major adjustments to tackle current supply-demand deviation situation to help the market to return to the direction of healthy and sustainable development. There will be a sharp shift towards a more affordable segment, meeting the real needs of the majority of middle-income, low-income urban residents.

In addition, the trend of cooperation between enterprises will be inevitable. The selling, merging and transferring project will be developed stronger than before, especially after August 15, 1977 (the enforcement of the resolution passed by the National Assembly on the handling of bad debts).

The state will promulgate many legal instruments and use tax tools, credit tools, tools for land use planning; urban development planning, housing, administrative tools to bind investor obligations in protecting consumers …, to adjust the real estate market with an aim to develop a transparent, healthy and sustainable environment; The administrative procedure is forecasted to be more open, simpler, gradually reducing the harassment situation as present.

Accordingly, the capital poured into real estate will be more. In particular, FDI capital flows and remittances continue to be important sources of investment in the real estate market in the future.

~~>>Update on new information on the real estate news in Vietnam here: Vietnam real estate news

However, recently there was information that the US President issued a ban on US financial institutions, banks to transfer money abroad in the form of remittances. If it is true, what impact will this have on the real estate market in Vietnam? Annually, over US$ 10 billion in remittances comes to Vietnam, of which about 20% is spent on real estate.

This is an important additional resource for this market. Most remittances sent home are from our compatriots in the United States. In case of the above, the ability of remittance poured to real estate will decline compared to the previous. Since then, it will impact the output of the real estate market, but not largely because this capital flow is mainly used to buy luxury housing, real estate resort while the supply of these segments are so excessing. On the other hand, in addition to the official remittance, the remittances sent by informal channels are also very abundant. If the official channel is closed, the amount of remittances sent in unofficial channel may increase. The ominous thing is that this can increase the risk for both the beneficiaries and senders.

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Real estate in hcmc has many potential risks
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