They have only themselves to blame for situation, says ministry
An HSBC branch in Ho Chi Minh City offers home loans that carry no interest for the first month. Bankers say interest rates on loans to the property sector have been falling at a fast pace in recent days.
Real estate developers glimpsing the first signs of a market recovery are seeking government help for their survival and pleading that they are not ignored during economic policy making.
Le Hoang Chau, chairman of the Ho Chi Minh City Association, said up to 90 percent of property firms posted losses last year, but until very recently, lending for real estate development and home purchases had been restricted by banks.
"Real estate should be considered a backbone of the economy, but instead it is being treated like a black sheep," Chau said at a conference last week, calling for support from the government.
While he agreed that developers have been hit hard by the market downturn, Deputy Construction Minister Nguyen Tran Nam said they are also responsible themselves for the situation that they are in now.
Many property firms depended too much on bank loans and thus struggled with financial difficulties when their credit access was blocked, he said. There were also problems in business strategies, with many developers spending a lot of money building residential projects that the majority of buyers in the country could not afford.
He said it may take a couple of years before the market can get out of the woods.
The government issued a resolution last month to stimulate the economy and Nam said one of its priorities is to revive the real estate market.
"Banks need to classify developers and offer support to help them survive difficult times. If property firms end up having bad debts or become incapable of repaying their loans, banks will suffer too," he said.
Restrictions on real estate lending, which were tightened last year, have been lifted by the central bank since April, allowing even housing speculators to take out loans.
An official of the Asia Commercial Bank said the central bank had tightened lending for the real estate sector, but now banks have begun to cut interest rates and aim to expand credit to it. The HCMC-based lender just lowered its rates on home loans for the fourth time this year to as low as 15.5 percent per year.
Other bankers also said interest rates on loans for the property market have been falling at a fast pace in recent days, easing to a range of 13-15.5 percent. HSBC said its home loans have doubled since April.
Despite doubts about whether homebuyers can really take out loans at low rates, many property firms are already planning to launch more products.
Novaland, for instance, has announced sales of more than 1,000 apartments in HCMC's District 2 at between VND25 and VND27 million per square meter. The company is now giving its customers the option to equip their own apartment to keep prices as low as possible.
Meanwhile, Hoang Anh Tuan, general director of Tac Dat Tac Vang, a HCMC-based real estate company, also said there has been an increase in customer interest in the market recently.
"When many projects come online at the same time, the competition for buyers will be very tough," he forecast.
Pham Ngoc Lam, chairman of Duc Khai Corp., said the market was "frozen" because many people could not afford high interest rates while others were cautious with projects being delayed by developers.
Cheaper loans will allow developers to finish their projects and homebuyers to return to the market, he said, adding that sales at his company began to pick up at the end of May.
Lam said many real estate companies have tried everything they can to bring down prices and spur sales. "Now, for low-end residential projects, developers will have a profit margin of only 2 to 5 percent."
But economist Vu Dinh Anh said prices are not low enough. Even though the market has cooled down from its peak period, home prices are still much higher above the income level of many Vietnamese, he said.
He said eased credit policies will be a good "remedy" for the market but a full recovery will not come easily.
Property brokerage Knight Frank said in a report last week that many people had lost confidence in real estate over the past three years but the market will start to recover.
"Ultimately, the real estate market needs cheaper money available to buyers and developers; however, we would encourage a steady decline in interest rates over the next 12-18 months, which will bring some certainty and stability back to the market," the company said.
According to Knight Frank, development within the country declined dramatically over the past three years due to the stagnant market
"[W]hilst it may be difficult to envisage at this stage, as soon as the market starts to improve, existing stock in most sectors, especially office and residential, will be soaked up pretty quickly, which will lead to increased prices and rentals and a shortage of stock," the company said.
"So within 24-36 months, we will be in a very different position," it forecast.