The challenges facing the real estate market have been highlighted in numerous reports. However, subjectively, it seems that the current market is quite weak for several reasons:
1/ Policy changes have been implemented, but their impact remains limited
A series of new legal documents have significantly affected the real estate market, but these changes have only been in effect for a few months. Additionally, some guiding documents at both the central and local levels have not been issued promptly. This has resulted in a lack of clarity and a half-hearted application of the new laws, ultimately causing more difficulties for individuals and businesses. A prime example of this is the adjustment of land price tables used to calculate land use fees.
2/ The market's purchasing power is critically weak
The economy has faced significant challenges in recent years, including the COVID-19 pandemic, global conflicts, and natural disasters that have hindered exports and economic stability. Consequently, homebuyers are unable to access the real estate market, which necessitates substantial savings. Recent fluctuations have further undermined these savings, making it increasingly difficult for potential buyers.
3/ Confidence has sharply declined
We must confront the fact that the current real estate market still hosts numerous businesses engaging in opportunistic and unethical practices. Some companies are raising capital without proper qualifications and issuing bonds without transparency, severely eroding buyer confidence. Restoring this confidence is not a quick fix; it requires decisive action. Businesses must be held accountable, and authorities must enforce strict regulations to control or eliminate dubious practices. Furthermore, creating a supportive environment for legitimate businesses to prosper is crucial for rebuilding trust in the market.
4/ “Blood Clots” in the Credit System
Bank credit capital is vital to real estate development. However, we are currently facing a critical issue: numerous properties within the credit system are suffering from severe liquidity problems, some even facing total illiquidity. This situation poses serious risks that must be addressed without delay. Examples of these troubled assets include projects entangled in legal issues while still under mortgage, individual plots of land that lack transaction eligibility, and projects priced significantly higher than prevailing market values. Current reports fail to provide specific statistics on the value of these distressed properties, but gathering this data is not only feasible but necessary. We can and must quantify the number of stalled projects, and many local authorities have already counted the individual plots of land. Determining these specific figures is essential for implementing effective measures to rectify this situation.
5/ Specifying the Role of the State and Enterprises in Developing Social Housing
Housing is a fundamental need for all individuals, and it must be addressed through proactive measures by the State and market solutions. In the realm of social housing, the State's role is not just important - it is imperative. This sector typically yields limited profits and lacks competitiveness compared to commercial housing, resulting in a noticeable disinterest from private businesses in developing social housing projects. Evidence clearly shows that many public real estate enterprises focus predominantly on commercial projects, which fails to meet the urgent demands of social housing.
Current legislation assigns the State a largely indirect role through support policies concerning land, administrative procedures, planning, and financing. However, what is critically lacking are direct actions, such as actively implementing social housing projects on available public land or allocating budget resources for site compensation, recovery, and clearance.
The term “State” encompasses not only public institutions but also State-owned enterprises. Many of these enterprises within the real estate sector are fully capable of effectively managing social housing initiatives. A prime example is the Becamex Binh Duong Corporation, which has demonstrated success in this area. It is crucial to assess and replicate this model, ensuring that State-owned enterprises prioritize the development of socially-oriented projects. The time for action is now; we must leverage the capabilities of State-owned enterprises to address the pressing need for social housing in our communities.
To address the issues mentioned above, we can implement the following measures:
1. Focus on issuing legal documents and eliminating institutional barriers for projects
The primary challenge is institutional. Local ministries and branches need to expedite the development of the legal framework to facilitate businesses in completing legal procedures quickly.
Additionally, we should prioritize resolving the backlog of projects that are facing legal obstacles. These projects hold significant potential for increasing supply and stabilizing the market, so it is essential to give them our attention and focus on overcoming these hurdles to alleviate the supply shortages driving the current land price surge.
Furthermore, given the current weakness of the market, it is vital to adopt gradual adjustment measures rather than implementing abrupt policies, such as taxing real estate. While taxing real estate can be a sound policy in general, it is not appropriate during a period like the present when the market requires restoration.
2. Restoring Market Confidence
Market confidence is a key factor in the stability and existence of any market. To restore this confidence, we must implement specific measures. There are two critical aspects of confidence to consider:
(1) Public Confidence in the Real Estate Market: It is essential to implement stringent measures, such as revoking projects, canceling investment licenses, or pursuing criminal prosecution when warranted, to eliminate unethical business practices.
(2) Business Confidence in the State: Many enterprises face legal challenges and often feel powerless, relying entirely on the guidance of local authorities. However, these businesses are the ones most affected when audits occur after the fact. Additionally, unclear legal regulations can lead to ambiguous post-audit conclusions, which can hinder project progress.
Establishing a transparent market is essential for stabilizing and promoting development. Only then can we anticipate the market's return to natural stability and growth.
Lawyer. Tran Dai Nghia - Investment Project Legal Policy Expert