Without resolving three significant bottlenecks, real estate market's revival will face numerous challenges

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Economic expert Vu Dinh Anh

How do you perceive the real estate market in 2024, particularly when there are reports suggesting a V-shaped recovery this year?

Initially, I believe that the real estate market in 2024 will manifest clearer signs of recuperation compared to the years 2022 and 2023. Nonetheless, the pace and magnitude of the recovery, as well as its shape, depend on a multitude of diverse factors. Concerning domestic elements, I deem the most crucial to be the enactment of new provisions of the revised Land Law. However, the revised Land Law, Housing Law, and Real Estate Business Law, as well as the legal framework and accompanying guidelines, will only become effective from the start of 2025.

Hence, the repercussions of legal alterations on the revival of real estate will only be observable in 2025, whereas 2024 will predominantly witness a psychological impact. A second, even more critical issue, is the participants or those involved in the real estate market. It is imperative to continue effectively addressing the three groups of problematic issues that have led to the recent stagnation of the real estate market.

The first issue is the illogical structure of real estate product groups, where an extreme focus on certain segments has led to a surplus of real estate, while another segment group suffers from a lack of adequate investment, thus becoming scarce, or even leading to an imbalance in supply and demand.

The second issue concerns the capital structure allocated for the real estate market. The reliance on banking credit not only remains unaddressed, but the credit resources for real estate, including both commercial and preferential credits, are overly concentrated on this market, while other capital sources are not mobilized in a comparable manner.

The third issue relates to the fluctuations in real estate prices. It is evident that the price changes in real estate recently have largely been influenced by non-market factors rather than market laws. If the aforementioned issues are not resolved, the real estate market's recovery in 2024 will certainly encounter numerous obstacles.

In your opinion, what transformations are anticipated in the market due to the newly enacted laws related to real estate?

Without a doubt, the provisions within the revised Land Law, as well as the amended Real Estate Business Law and Housing Law, all stipulate measures to alleviate difficulties, obstacles, and limitations that have previously hindered the real estate market from evolving in a healthy, sustainable manner. For instance, this iteration of the amended Real Estate Business Law introduces a multitude of changes, with approximately 80-90% of the regulations and legal articles from the 2013 Real Estate Business Law being revised and refined. Therefore, it is expected that the effectiveness of these three Laws from the beginning of 2025 will aid the real estate market in overcoming the limitations, deficiencies, and challenges that have developed over time.

However, the stipulation in the Law is one aspect, but the guiding documents of the law deserve two considerations. Firstly, they must adhere to and accurately reflect the spirit of innovation and perfection of the law. Secondly, and significantly more crucial, is that the new guiding documents of the law are the legal basis for our enforcement in reality, not merely on paper, i.e., restricted to the law itself. Thus, in 2024, our focus should be on developing guiding documents for implementing the revised Land Law, Real Estate Business Law… according to the newly enacted law. I regard these as pivotal points. And importantly, the methodology for constructing these documents should not only aim at detailing the law's provisions but also involve asking for opinions from many stakeholders, especially those directly engaged in the real estate market.

You mentioned the supply and demand imbalance as a major bottleneck in the market, with the affordable segment being exceedingly scarce; what solution would you propose to alleviate this bottleneck?

In terms of market segmentation and the structure of the real estate market, I believe there are numerous challenges, ranging from general regulations to the policy mechanisms of related agencies and departments, including limitations and obstacles originating from the real estate businesses themselves and current societal attitudes.

Firstly, we currently lack clarity on which segments comprise the general real estate market and, specifically, the housing market in Vietnam; what criteria are utilized to define these segments? Secondly, the notion of affordable housing is frequently discussed, yet there are no convincing official statistics from a research standpoint detailing how many income groups exist in Vietnam, their income levels, and their payment capacities. Thirdly, the term "low-income individuals" is commonly used without clear criteria defining low income. The dialogue concerns low-income individuals purchasing social housing, but at the current price of 25 million VND/m2, even if they qualify for a preferential loan with potentially 0% interest, I assure you these will not be low-income individuals.

Clearly, the policy conflicts and contradictions need resolution, based on several considerations: the need to classify customers and their housing requirements. Subsequently, classify real estate segments that correspond to each group. Finally, formulate policies for each group to assist them in accessing suitable product segments.

Thank you!