Unsold products

Prime Minister Nguyen Tan Dung and the working group of the Government on Wednesday had a meeting with leaders of Hanoi City to seek ways to rescue the city’s realty market.

Nearly 5,800 apartments, over 3,400 villas and semi-detached houses, some 330 low-cost houses and around 175,000 square meters of office for rent remain unoccupied in Hanoi, according to reports of property investors.

Supply in the high-end segment has far exceeded demand, whereas demand for low-cost houses among middle and low-income earners remains huge.

The central bank’s branch in Hanoi informed bad debts of the Hanoi property market had accounted for some 13% of the total bad debts of the banking system.

The overheated growth in the past has resulted in the property market being frozen at present, when the economy is experiencing slowdown and purchasing power is shrinking, said Nguyen The Thao, chairman of Hanoi City.

He added the State management of the property market was not efficient and failed to regulate the housing product profile in accordance with the market demand.

Speaking at the meeting, representatives of many agencies, banks and enterprises said the short-lived price surge and trade boom in Hanoi as well as other big cities had sent false signals about the actual market demand and affordability. As such, enterprises, including inexperienced and financially weak ones, rushed to invest in real estate.

Drastic measures needed

It is a must to remove the difficulties for the property market, because the frozen property market affects not only property traders but also credit institutions. In addition, it deals a hard blow to building material producers and construction, and thus hinders the economic growth.

Hanoi is seeking ways to reduce supply and stimulate demand. In addition, the city will assist property firms in dealing with bad debt and inventory, said Thao.

Hanoi proposed the Government issues a resolution on measures for the problems of the property market. Specifically, the Government should revise the policies regarding credit, tax and land.

Regulations on land use fee payment extension under the spirit of Resolution 13 should be further enforced. First-time homebuyers should be offered value-added tax reductions, suggested the municipal government.

Compared to the HCMC property market, the Hanoi market has fewer projects but the scale of each project is larger; outstanding loans are fewer and prices are higher, said Minister Dung.

He stressed the need to review housing and urban projects and classify them. The projects without site clearance should be halted.

As for the ongoing projects and the completed projects whose products remain unsold, the apartment sizes should be adjusted to meet the demand of the majority of citizens.

Meanwhile, the commercial housing projects that have finished site clearance but yet to begin construction should be turned into low-cost housing projects, serving workers and low-income people.

Therefore, the procedures for restructuring poor-liquidity and incomplete projects and transforming commercial projects into low-cost ones should be accelerated.

Minister of Finance Vuong Dinh Hue requested the city to disclose the information about scale and price of each project as well as commitments of project owners, so that people would not expect further discounts.

Discussions at the meeting on Wednesday, together with discussions with the HCMC government on the previous day, will be put forward at the regular Government meeting this month. After that, a specific resolution for the real estate market will be released, said the Prime Minister.

By Lan Nhi - The Saigon Times Daily - December 20,2012