Small property players are looking for a bigger piece of the action
Though the 2003 Land Law is in effect, transactions via property centres remain quiet, threatening bankruptcy for many domestic businesses.
In contrast, foreign-invested enterprises (FIEs) such as Richard Ellis Vietnam (CBRE), the Vina Capital Fund and Phu My Hung continue trading well. Strong financial backing, high level professionalism and proper strategy lie behind their success.
In the market, there are three types of transactions: purchase for real demand, long-term demand, and for re-sale.
Many small businesses, private brokers and individuals have sought to invest in properties which, in reality, are often small blocks or housing developments for low or medium-income earners.
Their key interest is speculation, so they have pushed up the real value of their products by providing untrue or short information, which in turn undermines trust in the collective market psychology. Low trust leads to artificial increases in trade, paralysing the medium-size block and housing market segments.
For high-class apartments, villas and office space, statistics shine bright, particularly in Hanoi and Ho Chi Minh City.
Under a survey by CBRE, from now to the end of 2010, this segment will see around 12,000 apartments completed.
But what matters most is that the higher the value of a property, the better the information provided must be. Home buyers need to be assured the property is not illegal, that it is safe and professionally managed.
Naturally, the advantages in this market lie not in the hands of small and unprofessional investors.
Large-scale and stable capital channels have yet to be adopted by Vietnamese investors.
After WTO accession, the financial market is expected to expand and foreign bankers and financiers will invest in potential markets, requiring Vietnamese banks to reform to international standards.
Meanwhile, the property market also depends much on legal and policy frameworks.
In 2005 and 2006, the National Assembly and the government issued a number of laws and guidance documents, such as the Housing Law, the Property Trade Law, and the Investment Law.
The Property Trade Law allows more local and foreign individuals and organisations to join the market.
Currently there are five brackets under which overseas Vietnamese can buy houses in Vietnam. These are long-term investors, those who have made great cultural and scientific contributions to the country, culturologists and scientists who have regular operations in Vietnam, the repatriated, and those who have resided at least six months in Vietnam. There are now about three million overseas Vietnamese, of whom 100,000 have been recognised as eligible for buying or owning a house in Vietnam.
Given higher incomes compared to indigenous Vietnamese, they usually choose high-class apartments and villas. Therefore, they will make up a vast gravitational force to the property market. Though they have to wait for further guidance documents from the government for the Housing Law which took effect on July 1, 2006, they are sure to have every land-use right for civil transactions that locals enjoy.
The law also allows capital mobilisation for housing projects to reach 70 per cent of the total investment capital.
In addition, the Statute for New Urban Areas issued by the Prime Minister on January 5, 2006, bans any form of capital appropriation by using a project on paper and an investor must have not less than 20 per cent of the total investment capital of a property project.
The latter regulation has marked a new measure that pushes incapable investors out of the market in order to facilitate a more systematic and regular market.
No. 778/September 11-17, 2006