A real estate exhibition in Ho Chi Minh City. PHOTO: DIEP DUC MINH
A glut of housing projects have created a surplus the market can't handle, Minister of Construction Trinh Dinh Dung said at a recent meeting of the Central Steering Committee on Housing Policies and Property Market early this month.
Up to 4,000 housing projects (covering 102,000 hectares, or 252,000 acres, of land) have been licensed for construction. Many, in Hanoi and Ho Chi Minh City, have not yet been built, he said.
The minister called on government officials to focus on dealing with the backlog and halt the issuance of new licenses, the minister said.
“There is no market for new projects. The booming commercial housing supply has caused difficulties for the market. Having no market for their products, many investors have delayed construction. There is no reason to license more new projects in the current context,” Dung said.
HCMC vice mayor Nguyen Trung Tin said a moratorium on new projects would cause losses for investors who have already spent a great deal of money on the preliminary steps to apply for construction licenses.
Stopping these projects could freeze the market, he said.
Deputy Prime Minister Hoang Trung Hai said: “Localities should carefully consider housing projects. We should only license special ones.”
New housing projects could add to the stockpile, causing more market difficulties. Some 34,000 apartments are currently unsold, he said.
Credit should be utilized to deal with the stockpile, instead of being poured into new projects, Hai added.
The deputy PM has tasked the Ministry of Construction with strengthening oversight on new housing projects. If the housing projects continue to sharply increase after the new policy is implemented, the ministry could call on the prime minister to license new projects.
Deputy Minister of Construction Nguyen Tran Nam said the property market has shown signs of recovery since early this year. The number of transactions have gone up and land prices have begun to rebound. Even projects in Hanoi and HCMC have seen a rise in price.
There have been 2,300 successful transactions in Hanoi’s property market—a doubling, year on year--during first quarter according to the ministry. The successful transactions have been brokered, mainly, at projects offering small apartments at reasonable prices, Nam said.
Amid controlled inflation and expanding credit, the property market is expected to continue warming up this year, he said.
The supply of medium and small apartments priced at less than VND20 million ($952.4) per square meter have attracted buyers. Newly finished high-end and medium-end projects will also see more action this year, Nam added.
The trend of transferring a whole or part of a housing project through mergers and acquisitions among project investors is also expected to increase this year, the deputy minister said.
Increase housing for rent
Deputy PM Hai said Vietnam built some 79 million sqm. of housing in 2013, bringing average housing acreage to 19.6 sqm. per head. However, the construction of social housing projects and rental properties remain slow.
The government should adjust policies to help the market attract more buyers and renters as well as investors in order to reach the target of increasing average per capita housing acreage, he said.
According to the National Housing Development Strategy, the average housing acreage will reach 25 sq.m. per head by 2020 and 30 sq.m. by 2030.
“We should boost the development of social housing projects and rental properties. In other countries, renting houses is very common. Meanwhile, local residents continue to want to buy housing,” Hai said.
Construction firms now aren't showing much interest in investing in rental properties, mainly because of low profits and concerns about risk. The government create new policy incentives to make sure these are built, he said.
Social housing projects should also be facilitated to meet market demands. The current subsidized housing supply has not met demand, especially in Hanoi and HCMC, he said.
The construction of subsidized housing projects continues to face difficulties mainly because of shortages in land, and poor state incentives for developing such infrastructure.
The deputy prime minister has called for an accelerated disbursement of the VND30 trillion ($1.43 billion) housing loan package, which was unveiled last June to help revive the property market. As of April 15, only some 5.6 percent of the package had been disbursed.
Construction Minister Trinh Dinh Dung said that conditions for obtaining preferential home loans should be eased to speed up disbursement of the loan package.
Hai said the package is a temporary measure for the property market. The government should build long-term credit for social housing projects in the near future.
A total of 129 social housing projects are now under construction; they are expected to introduce some 82,000 apartments to the market, according to the construction ministry.