Vietnam real estate has potential but administrative procedures are like a net of heaven and earth.

Overlapping between existing laws

At the discussion within the framework of the Forum "Sustainable Development of Real Estate Market and Awarding of Livable Project Certificates 2023", Dr. Nguyen Van Dinh - Chairman of the Vietnam Association of Real Estate Brokers (VARS) shared that currently, the real estate market is facing a shortage of social housing and low-cost commercial housing.

Besides the problem of scarcity of affordable housing supply, there are also some problems such as lack of mechanism and determination of many localities, leading to the situation that many projects have not been resolved, real estate businesses still have to face many difficulties.

Accordingly, despite very good market demand, there is still a decline in real estate transactions, recorded as a decrease of more than 90% because investors are facing the problem of "burying" capital and having to solve financial challenges.

Real estate - Vietnam's real estate has potential but administrative procedures are like a 'heavenly net' — Dr. Nguyen Van Dinh - Chairman of Vietnam Real Estate Brokers Association.

In that context, the Chairman of VARS said that the efforts of the Government and relevant ministries in issuing many policies to remove difficulties in the real estate market have had a positive impact on the market.

According to Mr. Dinh, in the first quarter of 2023, there were nearly 3,000 successful real estate transactions and in the second quarter of 2023, this number increased by 30%. Up to now, the confidence of investors has gradually been restored, many new projects have started to open for sale on the market, leading to an increase in the number of real estate transactions.

However, the expert assessed that the improvement in new housing supply and the stability of buyer psychology are still taking place slowly, requiring a lot of time to complete new projects. At the same time, although investor psychology is gradually stabilizing, it is still quite cautious, especially those who are facing financial pressure from previous investments.

Regarding the reasons for the current difficulties in the real estate market, Mr. Nguyen Quoc Hiep - Chairman of the Vietnam Association of Construction Contractors (VACC) said that the biggest problem facing the real estate market is the legal aspect.

Mr. Hiep explained that currently, real estate alone has 12 laws that directly affect it, and if expanded to indirectly affect it, there are up to 20 laws such as the Law on Planning, the Law on Fire Prevention and Fighting, etc. Therefore, to solve difficulties for the market, there must be a synchronous and fundamental solution to untangle the Laws.

"In particular, according to State regulations, ministries are responsible for making laws under their management, but there is no unified mechanism among ministries. Therefore, although the implementation process is very good, the process of making laws still has overlaps," said Mr. Hiep.

Real estate - Vietnam's real estate has potential but administrative procedures are like a 'heavenly net' (Figure 2). — Mr. Nguyen Quoc Hiep - Chairman of Vietnam Association of Construction Contractors.

In addition, according to Mr. Hiep, the reception of comments during the process of drafting the Law is still limited. Taking a practical example, the Chairman of VACC said that the recently passed Law on Bidding has shown some shortcomings, in the coming time, the Association will make recommendations to the management agency.

"Businesses want laws to have a longer lifespan instead of being short-term like now. Especially if the law is wrong but it takes 10 years to be amended, businesses will not have a legal corridor to carry out business activities," said Mr. Hiep.

Accordingly, Mr. Hiep pointed out 4 issues in the law that need special attention from the Government: site clearance; planning, land valuation and land use conversion. Mr. Hiep said that the law only needs to focus on the issues mentioned above to solve the market.

Sharing his own story, Mr. Hiep said that he had been developing the project for 12 years but still could not complete the site clearance work. The prolonged delay forced him to continuously go to the provincial leaders to work, the number of times he went to work was so much that Mr. Hiep received the saying "I feel ashamed when I see you" from the locality but the site clearance mechanism was still not handled by anyone.

Real estate - Vietnam's real estate has potential but administrative procedures are like a 'heavenly net' (Figure 3). — Vietnam's real estate market is currently experiencing an imbalance between supply and demand (Photo: Huu Thang).

Besides, the issue of administrative procedures is also one of the problems that the Chairman of VACC considers to be the core problem causing difficulties for businesses today. The Ministry of Construction 's plan to handle the simplification of administrative procedures and some related policies is very practical.

Mr. Hiep affirmed: "Vietnam's real estate has great potential, but administrative procedures are like a net. The Prime Minister has given instructions on reducing and simplifying administrative procedures, but the current administrative procedure processing process is still lengthy, a revolution is needed... If this can be done, this will also be one of the practical solutions to support businesses and promote the current real estate market."

Supply-demand imbalance

Sharing more about the issue of capital sources for real estate businesses, Dr. Le Xuan Nghia - Member of the National Financial and Monetary Policy Advisory Council said that the real estate market crisis had been predicted by experts in advance but could not be avoided.

According to the expert, real estate is a long-term essential product, so when supply and demand are out of balance, a crisis will occur. However, the previous crisis was oversupply, while this one is a supply shortage crisis. In addition, businesses are facing a serious shortage of capital, unable to open more projects, and the market has "frozen".

“We are watching to see if market confidence recovers when real estate corporations and businesses issue bonds. Most recently, the largest real estate corporation in the country issued bonds without any outstanding bank debt. We are holding our breath to watch, but the results show that the market is only “creeping” and “cautiously” recovering about 30% compared to expectations,” said Dr. Le Xuan Nghia.

According to the expert, the entire economy is currently stagnant, liquidity is facing serious difficulties in many industries, not just real estate. With these comments, Mr. Nghia believes that the real estate market may be in difficulty until the second and third quarters of next year.

“We have not yet entered the “eye of the storm”, we have not yet pushed up the supply of low-cost housing, so we have not yet solved the problem. How can businesses enter low-cost housing “freely”. It is necessary for the Government to regulate the price framework for low-cost housing like in China, to avoid discouraging low-cost housing investors. We have not yet created a level of real estate housing prices, so we have not yet solved the market crisis”, the expert said .

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