Vietnam's property market will not lack capital for development next year, experts have said (Photo: VNA) Hanoi (VNS/VNA) - Vietnam'sreal estate market will not be short of capital next year but will still facemany challenges from policies and administrative procedures, experts said atthe annual Vietnam Real Estate Forum.
Can Van Luc, chief economist ofthe Bank for Investment and Development of Vietnam (BIDV), told the forum in Hanoion December 19 that real estate capital with 60 percent from banks and 40 percentfrom other sources will be maintained next year.
On November 15, the State Bankof Vietnam issued Circular 22 effective from January 1, 2020 to tighten creditin the real estate sector, which will aid the market, according to Luc.
“The property market is healthyin the long-term and this circular will encourage loans for building, buyingand repairing houses,” Luc said.
In 2019, bank loans for realestate activities, such as buying, repairing and building houses, exceeded 300trillion VND (12.93 billion USD), up 15 percent year on year. Meanwhile,capital from other sources, including bonds, remittance and foreign direct investment(FDI), reached about 240 trillion VND (10.34 billion USD), he said.
"Thus, financial resourcesfor real estate are still relatively large, the local real estate marketdoesn't have to worry about lacking capital," Luc said.
This economist said there arefive main sources of capital flowing into the real estate market, includingbanking loans, private capital, FDI capital, corporate bonds and otherresources like cash of the people, gold and remittances.
In the first 10 months of 2019,loans for construction rose by 8.5 percent year on year to 8 trillion VND(344.7 million USD), 5.5 percent for trading of property and 19.6 percent forhouse buying and home repair. This year, the Government has consolidated loansfor trading real estate, and buying and repairing houses into real estate loansso the figure increased by 14.5 percent.
Regarding private capital, inthe first 11 months, there were 16,000 construction enterprises wereestablished, up 2 percent, and 7,300 newly-established real estate tradingenterprises saw their capital rise by 27.5 percent. Meanwhile, FDI fromnewly-registered projects and increases of existing capital reached 4.8 billionUSD.
The total value of enterprises’corporate bonds issued in the 11 months was 237 trillion VND (10.21 billionUSD), up 6 percent year on year, including 71 trillion VND (3.06 billion USD) fromreal estate enterprises. This is an impressive figure and an important capitalresource.
Vietnam allows businesses toset up trust funds to supply more investment for the property market, which isa potential channel in the future, Luc said.
Fintech could also be a channelto attract capital for real estate in the future, said Luc.
"Currently, the globaleconomy is recovering while global trade will recover next year, making foreigncapital flow strongly into Vietnam. The capital is expected to continue thestrong growth in Vietnam next year," economic expert Le Xuan Nghia said.
"Bank credit is alsoimportant for the stable development of the real estate market due to the largeproportion of capital banks supply. In the past year, the stable commercialbanking system has contributed greatly to the stability of the real estatemarket," Nghia said.
“The capital for the propertymarket should be centralised in a bank, because banks manage risks well. Thegood management of risks will bring benefits for developers of propertyprojects and property investors,” he said.
Besides that, domesticinvestment has flowed into infrastructure development, and Governmentinvestment in infrastructure is set to increase in 2020 with the constructionof several large projects, according to Nghia.
Private capital ininfrastructure will also continue to increase strongly next year. This willhave a great impact on the domestic real estate market next year and beyond.When infrastructure improves, the real estate market will improve.
Another factor that will alsoimpact the real estate market in the coming years is the large amounts ofcapital for urbanisation.
More opportunities to attractFDI to the real estate market will come from free trade agreements Vietnam hassigned.
Nguyen Hong Van, marketdirector of JLL Vietnam’s Hanoi branch, said foreign capital in the marketwould create many positive impacts. Recently, many foreign investors had soughtto invest or find Vietnamese partners to open joint ventures.
“This is a potential capitalsource. The foreign investor will bring capital and experience in developmentof property projects to Vietnam. Domestic businesses can find not only morecapital but also more experience to develop their projects at a higher level,”Van told Vietnam News.
"Foreign capital andremittances to the real estate market will increase and mergers andacquisitions (M&A) will continue. Foreign businesses will collaborate withlocal entities to create quality real estate products," Van said.
Foreign investors put theirmoney into many fields such as commercial property, apartments and industrialparks. Investment from China has been mainly in industrial zones, whilecommercial centres and shop-houses have attracted the most capital from Koreanand Japanese investors.
Meanwhile, Nguyen Manh Ha,Chairman of Landora Group, said the people held a large capital resource with atotal value of cash, gold and remittances of more than 16 billion USD, thoughthis resource is congested due to legal issues.
While real estate firms canexpect stable development next year, licensing policies and administrativeprocedures are set to give them headaches.
Ha said it was important tosimplify administrative procedures, especially in tax calculation, and createfavourable conditions for businesses in working with State agencies.
According to Nghia, currentmarket supply has decreased slightly but is still higher than demand and realestate prices have not decreased.
With positive adjustments fromthe State, the real estate market is expected to return to normal developmentfrom the second quarter of next year grow steadily due to the high demand forhousing.
At the forum, the experts saidreal estate segments set for strong development next year would be land plotsand apartments.
Industrial property would alsohave great potential for development in the near future, Van said.
The experts also said in thefirst half of 2020 the real estate market would face difficulties because ofproblems related to mechanisms, of which the delay in licensing new projectswould impact new supply.
Dang Hung Vo, former DeputyMinister of Natural Resources and Environment, said in 2019, few new realestate projects were licensed due to legal tightening. Real estate projectsunder construction now have been licensed from previous years.
In the next 2-3 years, ifgetting construction licences for projects continued to be tough, the marketwould face supply reduction while demand would still increase, Vo said.
The domestic condotel marketwould be temporarily quiet next year after the failure of the Cocobay Da Nangdeveloper to fulfil payment obligations to investors. But this market wouldcontinue its development if the State completes the legal system for it.
Nguyen Van Dinh, Vice Presidentand General Secretary of the Association of Real Estate Brokers, said he wouldchoose investment in condotel because legal system for this product would becompleted under market demand.
On the other hand, Vietnam’sresort real estate prices were still low compared to other countries in theregion and the world. Vietnam’s tourism industry was sure to boom in thefuture, he said. Therefore, condotel prices would increase together with thedevelopment of the tourism industry.
To get success in developmentof this condotel market, Nghia said, project developers should work with travelcompanies in building attractive programmes for tourists./.
VNA
