Drastic solutions proposed to rescue property market

VietNamNet Bridge – The Vietnam Association of Financial Investors (VAFI) has sent a document to the Prime Minister, suggesting solutions to unfreeze the local property market, whereas economists said the market should not be intervened in.

The document was also sent to construction and finance ministers, governor of the central bank, the governments of HCMC and Hanoi and State Capital Investment Corp. (SCIC).

Subsidy suggested

VAFI proposed the State set aside VND8 trillion to subsidize interest rates in the next three years in order to provide low- and middle-income home buyers with preferential lending rates.

For example, the buyer of a VND2-billion house can access a lending rate of 7% for the first three years as the State will subsidize 3-5% per year, said VAFI.

With VND8 trillion, the State will attract an amount of some VND120 trillion, equivalent to 120,000 apartments, the association estimated.

The second solution is that localities, especially big cities, should establish their own low-cost resettlement housing funds for the period from 2013 to 2020.

As property prices have dropped sharply (by 30-60%), big localities should make plans to buy around 25,000 apartments worth some VND25 trillion, VAFI suggested.

It is possible to mobilize funds to implement these plans. If localities tried their best, they could buy 10,000 apartments, said the association.

In addition, the financial resources from SCIC and the enterprise reform fund run by SCIC would be enough to buy 15,000 units.

Moreover, VAFI suggested establishment of “property market rescue teams” on both central and local levels.

VAFI came up with such suggestions after senior officials of the Ministry of Finance, the Ministry of Construction and the governments of Hanoi and some other localities had said the State should rescue the property market.

Objection from economists

However, some economists deemed property market rescue with an aim to revive the economy to be “very improper in the current context”.

Nguyen Dinh Cung, vice president of the Central Institute for Economic Management, said the State should not and could not intervene to rescue the property market at present.

The main reason is financial resources. Cung said: “The State can no longer save the real estate market given the current problems in State budget collection.”

It is not fair to rescue those creating the real estate bubble and making millions of citizens unable to access housing products, he said.

“Saving them will arouse public displeasure,” he stated.

Meanwhile, Tran Dinh Thien, chairman of the Vietnam Institute of Economics, said realty firms must lower prices to save themselves rather than leaning on the State’s help.

The current economic situation is much more difficult than 2009, when the State announced to spend over US$8 billion to stimulate the economy, he remarked.

Sharing the view of Cung, Thien said citizens would gain access to housing products if property prices were further reduced.

“If the property market was rescued but prices were not cut, then who would be saved? What would the majority of citizens gain?” he wondered.

According to a research of Dragon Capital, Hanoi and HCMC each has over 35,000 apartments on sale. If an apartment was priced VND2 billion, the total amount stuck in the property market would be VND140 trillion.

Without measures to stimulate demand, it would take at least seven years to completely settle this volume of unsold apartments, said Dragon Capital.

Source: SGT

Vietnam, rescue property market, VAFI, SCIC