2008 was a difficult year for Vietnam’s economy in
general and the local real estate market in particular. From mid-2008
until now, the real estate market has been frozen and many analysts
predict that there is no possibility of the market recovering this year
due to the gloomy prospects for the global economy.


Difficulties remain


The difficulties Vietnam’s real estate market faced in
2008 have continued prolonging in the first few months of this year.
The biggest difficulty is the shortage of capital. Many investors
suffered heavy losses last year and could go bust. In addition, banks
that provided heavy loans over the past two years have not been repaid
yet. Meanwhile, many foreign-invested projects worth billions of
dollars are unlikely to be implemented this year as many partners are
confronted with financial difficulties.


In early 2009, there have been some positive signs for
the real estate market to pick up as some banks have begun to provide
mortgages again. However, economic expert Bui Kien Thanh elaborates
that if the banks stop providing loans, many real estate enterprises
will face bankruptcy, seriously impacting the banks. Recently, real
estate prices have fallen but still remain high. This is attributed to
the fact that a lot of properties in Vietnam have changed hands many
times over, pushing up the prices each time.


Looking forward to the government’s demand stimulus package


In February, the Ministry of Construction submitted a
stimulus package to the government to save the real estate market, with
a focus on housing for low-income earners. A real estate expert Dang
Hung Vo says that the package is a good idea but some issues need to be
addressed to ensure it is effective. Firstly, it is necessary to know
if the package is effective and how long it will last. Secondly, it is
necessary to reform the management of the housing problem.


According to Mr. Vo, to ensure long-term sustainable
development, the stimulus package should be considered as an effort to
attract more investment from companies that employ a large number of
workers and from the workers themselves.


Focusing on building houses for low-income earners


A recent market study showed that there is an
increasing demand for accommodation amongst low-income earners.
Economists say that to kick start the domestic real estate market, it
is essential to focus on building houses for this section of society.


According to the Ministry of Construction, each
low-income earner has a living space of only 7-8 sq.m on average, while
they need at least 10 sq.m per capita. At present there is an imbalance
between the supply and demand for accommodation from low-income
earners. This is attributed to investors who are keen on building
up-market apartment buildings to earn high profits.


Dang Hung Vo says that it is necessary to launch
promotional campaigns and offer preferential treatment for projects to
build houses for low-income earners by reducing the tax on land use and
providing low-interest loans. However, tough inspections need to be
stepped up to ensure that low-income earners can access these
preferential loans and tax relief is an effective way of giving a
helping hand to low-income earners, he adds.


However, as he argues, there remain some flows in the
land-use tax that cannot prevent speculation. Therefore, it is
important to impose higher taxes on potential investors involved in
projects to build houses for the poor.


Regarding the purchasing power of low-income earners,
Bui Kien Thanh says that in the 1930s the US offered preferential loans
for low-income earners to buy houses over a long time. Also, in
Singapore, businesses raised funds to help their employees buy their
own houses, while many Swedish people set up their own cooperatives to
build houses. Following the Swedish model, the Vietnamese Cooperative
Alliance has recently decided to build houses for its own members.