Phu My Hung new urban area in Ho Chi Minh City. (Source: VNA)
Risks still lie ahead
Chairman of the Ho Chi Minh City Real Estate Association (HOREA) Le Hoang Chau said although the property market bounced back thanks to the Government and local authorities’ efforts in removing bottlenecks, it has not developed stably and risks still lie ahead.
According to the association, many property enterprises are facing risks as investors have paid much for ground clearance compensations but cannot complete legal procedures, so they are not allowed to implement their projects.
Risks related to finance and credit are also worrying enterprises, the HoREA said.
The State Bank is implementing a roadmap to gradually reduce credit to the real estate market and, as a result, enterprises are encountering difficulties in finding other sources of capital to replace part of credit capital. In addition to expanding cooperation with foreign-invested enterprises, or seeking capital on the stock exchange, real estate enterprises have decided to issue corporate bonds to acquire more capital.
Chau said that in the first five months of 2019, real estate, construction and infrastructure enterprises issued corporate bonds worth up to 16.2 trillion VND (695.7 million USD), accounting for 27 percent of the total value of bonds issued. Even real estate enterprises have issued bonds with very high interest rates of 12-14.5 percent per year, doubling the savings interest rate.
Budget collection affected
A fall in the real estate market has caused heavy impact on Ho Chi Minh City’s budget collection. According to the municipal Taxation Department, as of June 30, tax debts were 13 trillion VND (559.5 million USD), 4.9 trillion VND higher than those in late 2018. Of the total, 61 percent was owed by real estate enterprises.
Explaining this situation, the department said that since mid-2018, business activities related to the sector have experienced a slowdown. Several key projects cannot be carried out, leading to a reduction in budget collection.
Tran Vinh Tuyen, Vice Chairman of the municipal People’s Committee, predicted that the city’s domestic budget collection can be 15 trillion VND lower than the assigned target, including 12 trillion VND from land-related issues and 3 trillion VND from enterprises operating in the property sector.
Removing bottlenecks
To overcome difficulties, HoREA suggested the municipal People’s Committee to assign the Department of Planning and Architecture to receive and handle documents on detailed planning projects with the 1/500 scale proposed by investors.
It also proposed the committee direct the Department of Finance to soon develop the principles of land valuation criteria for real estate business projects, commercial housing projects, ensure the calculation of land use fees are reasonable and avoid losses of State budget.
The Department of Finance and the Department of Natural Resources and Environment should complete the process and administrative procedures on calculating land use fees for commercial housing projects in order to save time and increase State budget collection.
For projects under inspection, the association suggested authorities to have conclusions at an early date to allow investors to carry out their projects as soon as possible. Many businesses agreed that legal review on real estate projects is necessary, thus helping investors rectify their investment and business activities and fully implement their financial obligations. However, a delay in this procedure can have huge impact on investors and consumers.
Experts expect a brighter scenario for the second half of 2019 as large-scale projects will be rolled out very soon.
In terms of segments, mid-end and affordable will continue to dominate while new launches from luxury and high-end will account for only a small proportion. The east will continue to be a market hotspot with new projects in District 2 and District 9. Inventory will be absorbed in the next few quarters thanks to limited new launch supply.
Ho Chi Minh City’s realty market will welcome abundant supply from eastern areas, led by Vinhomes Grandpark in District 9 with more than 10,000 units, and five new projects in District 2.
The supply will come from other areas like the west with AIO City, Akari City and D-Homme projects, and the south with Eco Green Saigon, Sunshine City Saigon and Lovera Vista.
