Businesses found new opportunities amidst difficulties
President Nguyen Tran Nam shared that businesses are facing many difficulties, especially raising capital when the market is preparing to enter a quieter phase. But a challenge to the market is an opportunity for large, reputable companies with deep resources and long-term strategies.
President of VNREA stated: “Businesses always try to turn challenges into opportunities. The way the market works is to eliminate weak, poor, and amateur companies, and to keep large enterprises with strong will. Difficulties will always come with advantages to balance the society and dismiss market disorders.”
Investors’ product strategy is getting more accurate when meeting actual needs. In particular, large, expensive apartments are being replaced with smaller, more affordable ones. That means project orientation and apartment structure is more specifically and carefully calculated, to be more practical and to increase transactions.
In addition, the Government and other ministries are conducting inspections on corruption in big cities like Hanoi, HCMC, Danang, with further instruction to keep track and report results in March 2019, even violations from many years ago will also be called upon.
President Nguyen Tran Nam assessed: “This brings positive signs because projects’ approval and licensing is being taken more seriously. However, the downside is the process will be more time-consuming, more difficult, leading to a risk in supply reduction in 2019.”
What opportunities await the 2019 market?
According to Circular 16, in January 1st 2019, credit tightening will reduce the rate of using short-term capital for medium to long term loans by 40%, meaning that mandatory reserve ratio is increased to 200%, and real estate credit growth rate is dropped to 6 or 7%, only half of market’s average.
On the other hand, FDI pouring into real estate keeps increasing. In 2018, FDI inflow to Vietnam is roughly 22 billion USD, of which real estate accounts for 5.6 billion USD and seizes second place with 20% total. In addition, M&A activities are also remarkably exciting with the participation of foreign investors including the U.S., Japan, and Korea. The fact that National Bank has tightened credit on real estate has led to a sharp drop in major capital inflows but created the chance to attract FDI.
On the topic of tourism real estate, president of VNREA said that condotel had been highly active in first six months but has started to slow down since the end of the third quarter 2018. However, the government is actively pushing to support and propose a legal guideline for condotel to become a fully-fledged, standardized, and legally traded product.
As reported by VNREA, this year is the fourth in a row to record a 30% increase in the number of tourists. Foreign visitors are expected to reach 17 to 18 million people by 2020, leading thousands of hotel rooms shortage. This shows that Vietnam’s resort real estate still has great potential when demand is constantly increasing while supply is limited.
“Currently, government’s management, investors’ commodity structure and customers’ trading activity are on the right track, giving the opportunity for the “big guy” to seriously do business. This can be clearly seen through government’s policies in tightening credit and improving administrative procedures; businesses’ flexibility to the market; completed projects’ suitability to the actual needs of the people; and buyers’ increased experiences in purchasing and investing property. To summarize, in 2019, the real estate market will be better organized and stabilized.”