VietNamNet Bridge – The real estate market has got frozen, while investors have run away, leaving the market in the oversupply status. It is estimated that with 60,000 apartments unsold, roughly 2.86 billion dollars worth of capital has been “buried” under the real estate projects.
According to Nguyen Manh Ha, Director of the Housing and Real Estate Market Management Agency under the Ministry of Construction, Hanoi is facing a serious oversupply; especially, apartments and land in the suburb areas remain unsalable.
Analysts have confirmed that the price decreases have been seen in all market segments, from high-end to popular apartments. The sharpest price decreases have been reported for the apartments priced at over 25 million dong per square meter.
The absurdity of the market is that while it has abundant unfinished apartments, it still lacks finished products of different kinds. While unfinished products remain unsold, thus making it impossible for real estate developers to arrange capital, necessary infrastructure works have not arisen.
Some residential quarters remain deserted with very few buyers, simply because people do not want to live in the areas with no school or market.
The report released by a consultancy firm showed that Hanoi has some 40,000 apartments unsold. The figure is 20,000 in HCM City. This means that 60,000 apartments have been left unsold nationwide.
Vu Dinh Anh, a well-known economist, said if every apartment is priced at one billion dong, then the total investment capital buried under the real estate projects would be 60 trillion dong, or 2.86 billion dollars, a huge sum of money.
Also according to Anh, the biggest problem of the property market now is that sellers offer unsuitable products. Real estate developers sell branded goods in rural areas, or high end and luxury apartments have been put on sale, targeting low income earners.
Therefore, though the accommodation demand keeps rising every year with the population increasing by one million people a year, apartments still cannot be sold. The problem lies in the overly high prices of the products. With the average income of five million dong a month, a worker would have to wait 20 years to be able to buy a house.
“The quality of the products is very good, but the products remain unsold,” Anh said. “I am afraid that the 2009’s scenario would repeat this year. However, unlike 2009, there would be no demand stimulus package to be launched this year to help rescue the market,” Anh said.
Deputy Minister of Construction Nguyen Tran Nam has attributed the current oversupply to the real estate investment wave triggered some years ago. At that time, power companies, oil and gas, insurance and commercial banks all rushed to inject money in the real estate market. This explained why the outstanding loans given to fund real estate projects once reached 280 trillion dong before decreasing to 180 trillion dong at present.
The weak demand has forced real estate developers to slash the sale prices to boost sales. Most recently, after reducing the sale price by 7 million dong per square meter in 2011, the developer of an apartment bloc in Linh Dam urban area in Hanoi has slashed the sale price by another 2 million dong.
Ha from the Ministry of Construction believes that the thing that needs to be done now is to help enterprises clear the inventories. One of the solutions, as suggested by Ha, is that the government should exempt VAT tax, thus leading to the real estate price decrease.
“I strongly recommend exempting the 10 percent VAT tax in order to lower the sale prices,” Ha said.