The past three years have knocked the confidence out of the property market, with many companies and individuals involved with the real estate market losing considerable sums of money.
When people lose confidence, they look for alternative safe havens to invest, and for most Vietnamese, gold, bank deposits and equities have proved more attractive than property, according to Stephen Wyatt, country manager of the property service firm Knight Frank Viet Nam.
However, there is some light at the end of the tunnel, with tighter legislation on gold trading, a downward trend on bank deposit rates and profit-taking from the stock market causing the momentum to shift.
The spotlight is once again beginning to shine on real estate.
"We are seeing many of the more experienced developers, investors and buyers that have been sitting on the sidelines in the past 12 months deciding that this is the time to dip their toe back in the real-estate waters," he noted.
"With further interest rate cuts predicted throughout the course of 2012, confidence is slowly beginning to come back to the market, and provided the global economy doesn't give us any further nasty shocks for the remainder of the year, and inflation remains stable, we firmly believe the real estate market will start to recover."
Ultimately, the real estate market needs cheaper money available to buyers and developers.
Wyatt said a steady decline in interest rates to take place over the next 12-18 months would bring some certainty and stability back to the market.
"We are still receiving strong interest from foreign investors that see there is a window of opportunity; however, the obstacles and hurdles remain the same," he said.
"In order for Viet Nam not to lose out on this much-needed investment to other countries, there remains a strong need for much tighter regulation throughout the whole real estate industry with a strong and effective legal framework, with more professionalism and transparency," he added. "With further control and tighter legislation, there is no question Viet Nam will benefit from more and more foreign investment."
So where is the opportunity? Due to a very stagnant property market, development within the country declined dramatically over the past two to three years. While it may be difficult to envisage at this stage, as soon as the market starts to improve, existing stock in most sectors, especially office and residential, will be soaked up pretty quickly, according to Wyatt.
This would lead to increased prices and rentals and a shortage of stock. So within 24-36 months, the market is expected to be in a very different position.
Meanwhile, during a meeting organised by the HCM City Real Estate Association on Wednesday, deputy head of the Ministry of Finance's Price and Market Research Institute Vu Dinh Anh said that high interest rates and unreasonable property prices remained challenges for a breakthrough in the market.
According to Anh, apartment prices in HCM City have come down significantly; however, in several cases, they are still out of reach for end-users, and will negatively affect market liquidity.
Property developers' difficulties in gaining banking loans to continue their projects have proved to be an obstacle for market growth.
Speaking at another event organised by the Viet Nam Real Estate Association, Nguyen Manh Ha, head of the Ministry of Construction's Housing and Real Estate Management Agency, said the market did not have small-sized apartments to suit low – and average-income earners.
Regulations stipulate that commercial apartments cannot be smaller than 45sq.m. In case of those for people of low income, they cannot be less than 30sq.m.
Ha said the minimum apartment space in New Zealand was 30sq.m. It is 25sq.m. in Thailand and 15sq.m for a two-resident unit in Hong Kong.
Le Xuan Nghia, vice chairman of the National Financial Supervisory Commission, believes that over the next four or five months the property market would begin to see a recovery, thanks to efforts from the Government to support businesses, including tax reductions and abolition of the fines on overdue loans.
He, however, said that the key knot to be unravelled was the bad-debt problem, which had made banks unwilling to provide additional loans to businesses.
He praised the decision taken in Sweden years ago, when its central bank set up a debt-trading company to help private companies meet requirements for new loans
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