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Real estate industry forecast: Difficulties in 2020

Friday 22, 11 2019
2019 has witnessed the difficulties of the real estate market when the majority of housing construction projects were stalled while businesses not only suffered from capital loss but also had to pay a lot of expenses incurred, in terms of both time and money.
Real estate industry forecast: Difficulties in 2020

Many people are concerned that in 2020, this market will be more severe and real estate businesses will face much more difficulties. The system of legal documents is still overlapping and conflicting; licensing procedures are cumbersome; mechanisms and policies for social housing development and renovation of old apartments are not suitable; regulations on development and transaction of condotel products are not clear; confidence of investors is declining ... are the factors that have caused the crisis of the real estate market recently.

Real estate industry forecast: Difficulties in 2020

Strong purchasing power amid scarcity of goods

The crisis is reflected in the strong purchasing power of housing real estate while the supply is scarce due to a series of frozen projects. As a result, housing prices are pushed up, and people, especially those with average or lower income, are less likely to own houses. At the same time, businesses are also miserable because the capital cost and interest rates have increased many times while business opportunities are lost.

According to Mr. Nguyen Tran Nam, Chairman of the Vietnam Real Estate Association, difficulties in the real estate market will continue to take place in 2020 due to legal issues, credit issues and capital flow safety.

"That legal problems are not easily solved while credit for real estate is increasingly tight and access to land is increasingly limited will make the market increasingly difficult, therefore, businesses must be careful. However, this period will be different from that of 2009-2010. At that time, supplies were beyond consumers’ needs. Businesses’ capital was not large while they had to suffer huge inventories and outstanding loans amounted to more than VND 200,000 billion, which is now reduced to just over VND 20,000 billion. The current difficulty is the shortage of goods sources as the purchasing power is large and the cash flow poured into the real estate market is huge." Mr. Nam said.

Further analyzing this, Mr. Nguyen Quoc Hiep, Chairman of GP.Invest acknowledged that the difficulties of the market as well as real estate businesses are now due to the fact that the public authorities have not applied new laws yet. Real Estate Business Law, Planning Law and Land Law all have been amended. Accordingly, many regulations related to land clearance, change of land use purpose, auction, land bidding ... have also changed. However, administrative procedures are still vague and overlapping.

Authorities are still not clear on what is new, what should and should not be done. Therefore, no one dared to make decisions, and the authorities could not guide businesses to comply with the law, causing a series of projects to be halted. However, the opinion of real estate enterprises and those who obey the law does not seem to be paid attention by the law drafting agencies, so many regulations are still inadequate, causing a lot of frustration.

Mr. Nguyen Quoc Hiep said that 2020 will still a hard time for the real estate market. There will not be enough projects and new products. Moreover, with the application of the new land price list following a strong upward trend, site clearance and project implementation will also be more costly, and sales will be difficult because of high product prices.

Lower profitability

Also giving his opinion on the above issue, Mr. Le Hoang Chau, Chairman of Ho Chi Minh City Real Estate Association, said that the real estate market is congested, the supply of housing projects and products are reduced, and due to "latency", it will continue to have a negative impact in the coming years, making a number of businesses trapped in difficult situations or even in danger of bankruptcy. It is difficult for consumers to own houses because prices tend to increase according to the law of supply and demand (large demand but small supply). State budget revenues from land use levies and the real estate market may fall even further.

Mr. Nguyen Van Dinh, General Secretary of the Association of Real Estate Brokers, said that the feasibility of some provisions of the law on real estate business is low, not only increasing investment costs, reducing competitiveness of enterprises but also slowing down the project implementation process, causing investors to lose confidence.

However, these problems can hardly be solved immediately. In addition, credit sources for real estate are increasingly tightening, causing a decline in cash flow to this field. Therefore, in the coming time, the difficulty of the real estate market will continue, which requires investors to research the market before implementing the project. They may have to pour more capital, be more thoughtful and cautious, and accept lower profitability.

>>> Industry forecast: Vietnam real estate 2020

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