Vietnam’s real estate market is currently facing many difficulties, ‘bottlenecks’ need to be opened early such as planning problems, high land prices, slow disbursement of investment capital, … The real estate market in Vietnam and proposals of solutions for this situation have been mentioned at the Conference to solve and promote the Vietnamese real estate market. The following article will review some common difficulties in the real estate market in Vietnam.
On the morning of February 17, 2023, Prime Minister Pham Minh Chinh chaired the national online conference with the theme “Removing and promoting the real estate market to develop safely, healthy and sustainable”.
Attending the conference were the Deputy Prime Minister Le Minh Khai, Tran Hong Ha and the leaders of the Ministry of Construction, the Ministry of Planning and Investment, the Ministry of Natural Resources and Environment, the Ministry of Finance, the Ministry of Public Security, the Ministry Justice, Governor of the State Bank of Vietnam, Ministry of Information and Communications, … and many other delegates.
At the conference, Prime Minister Pham Minh Chinh said that in terms of common ground, Vietnam is currently developing in the right direction, following the orientation of the socialist market economy. However, in this process, there are still many difficulties and obstacles that need answers, trouble solving, displayed clearly in the Vietnamese real estate market.
In terms of objective reasons, the Prime Minister said that Vietnam is a large open economy, affected by external influences, so the geopolitical tensions, Ukraine – Russia wars, strategic conflicts in 2022 has negatively affected the development of Vietnam.
Real estate supply and housing are scarce
According to the report presented at the Conference, Vietnam currently has 126 projects with 55,732 licensed apartments (the number of projects is about 52.7% compared to 2021); There are 466 projects with 228,029 apartments under construction (about 47.7% compared to 2021); There are 91 projects with 18,206 apartments completed construction (about 55.2% compared to 2021).
For social housing projects, there are 09 new licensed projects across the country with 5,526 apartments; There are 114 projects with 6,196 apartments completed construction; There are 27 projects with 8,245 apartments that are eligible to sell in the future according to the notice of the Department of Construction.
For workers’ housing, there are 02 new licensed projects across the country with 1,729 apartments; There are 01 project with 32 apartments completed construction phase; There are 04 projects with 2,328 apartments that are eligible to sell in the future.
In general, the current structure of housing products in Vietnam is still in favor of the high-class housing segment for people with average – high income. On the contrary, the number of social housing segments and workers’ housing is still relatively low, affecting the security of most Vietnamese workers as the working class – the foundation force of the producing and export establishments for consumption in the domestic and international markets.
Difficult to find ways to balance costs
According to the representative of the Ministry of Construction, Deputy Minister Nguyen Van Sinh, the main difficulty of real estate businesses in Vietnam is due to difficulty in access to capital, bonds, … and interest rates, foreign currency exchange rate, price of input materials too high leads to the price of products increased, difficult to balance revenue and expenditure.
To solve this problem, real estate businesses have to narrow the scale of investment in production and business, streamlining the apparatus, reducing the labor force, stopping, postponing investment activities and constructions of a number of current projects and new projects.
However, these solutions are only short-term solutions with many unpredictable consequences. For example, the problem of reducing the labor force has made the lives of many workers and their families more difficult in maintaining their lives, having to find new jobs to cover the expenses, contrary to social security policies that real estate industries in particular and social industries in general are aimed at.
Legal vulnerability of real estate
Currently, the law on real estate is still relatively confusing, sketchy or incomplete, there is a situation of ‘law over law’ leading to controversy and confusion in application practices.
The gaps mentioned in the conference include difficulties in determining land prices, calculating land use fees, site clearance, land allocation, auction of land use rights, market prices, … in 2022, market price in Vietnam has increased rapidly, creating ‘land fever’ leads to the possibility of real estate bubbles.
When conducting trading, transfer of real estate, buyers and sellers often agree with each other about making 2 contracts, one contract of real transfer price and the other records the fake price, usually only little higher than the land price as prescribed by the land price list to avoid being detected by government officials.
It is this agreement along with the reality of speculation, the real estate profitele has made real estate prices on the market increasing rapidly, causing difficulties in the market.
Currently, the proposals for changing the land price list close to the actual price on the market have been submitted with the time of review and regular modification shortened than before.
Complex legal procedures are also shown in many other stages. For example, at the Conference, the investor of the social housing project must determine the land use fee before carrying out the procedures for exemption from land use levy, creating unnecessary administrative procedures and costs.
In order to solve these problems, the Drafting Board of the Draft Laws amended and supplemented on real estate should quickly promote the completion progress and submit to the National Assembly for consideration regarding the Land Law (amended), Law on Housing (amended), Law on Real Estate Business (amended), Bidding Law (amended), … and then, building and submitting to the Government amending and supplementing decrees guiding the implementation and the order and procedures for investment, land, urban planning, construction, tax, securities, …
The planning of real estate is unreasonable
Currently, the law has many regulations affecting the overall planning of an area. For example, according to Clause 4, Article 1 of Decree No. 49/2021/ND-CP, commercial housing projects in urban areas of type III and above must spend 20% of the land fund to build social housing.
However, the 20% land fund is not enough to meet the strong social housing demand in recent times but because of this planning, localities have not arranged land funds to develop the independent social housing project, creating passive and lack of assertiveness in the real estate development plan of localities.
In addition, Clause 3, Article 54 of the 2014 Housing Law also stipulates that social housing projects must spend at least 20% of the housing area for rent and the investor can only sold houses after 5 years of putting into use. However, the application practice shows that many projects can’t be rented due to low demand, which leads to the situation of wasting housing value, causing heavy damage to the investor.
These law provisions have been issued but not carefully considered the actual situation, leading to unstable general planning. Thereby, it is necessary to amend the law in the direction of flexibility to avoid waste or unreasonable planning, affecting the development of society and people’s lives.
Considering the actual situation of planning, construction planning, construction management in the area on both sides of Le Van Luong, To Huu, Trung Hoa – Nhan Chinh urban area (Hanoi) used to be a hot real estate topic that needs to be solved and learned.
According to the inspection conclusions, the planning target at the planning project is not suitable for the approved project. The wrong adjustment, ‘raising the floor’ of the apartment has led to the situation of population growth, lack of education land, schools, greenery, service works, … It is these facts that led to the problem Le Van Luong – To Huu route is always in a state of traffic congestion, especially during peak hours, seriously affecting people’s lives and national images.
Thereby, it is necessary to watch and control more closely the assigned planning, general planning, detailed planning, etc. to avoid the situation of group interests between the investor and the competent authorities.
Real estate is basically a miniature planning problem. We need to develop society in the direction of balance, ensuring the national development orientation, completely solving frauds, infringing on real estate regulations for personal or local interests through the regularly meetings and conferences on the status of Vietnamese real estate, tighten the management of planning and construction, regular inspection, ensuring corruption, bribery decrease or end completely.
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