3 expectations for the real estate market

According to a real estate sector report by Mirae Asset Securities Joint Stock Company, the government is actively seeking solutions for the real estate market. Currently, this market faces many challenges due to tightened credit, controlled bond issuance, and high interest rates. Accordingly, Mirae Asset experts expect that three factors, if implemented, could help alleviate some of the market's difficulties.

A view of Vinh city. Photo: Archival material.

Firstly, Decree 65 is expected to be amended, helping to unlock capital for businesses from the third quarter. Experts and businesses believe that Decree 65 is currently in a restrictive direction, which is not suitable for the current context, making it difficult for businesses to issue bonds and meet requirements regarding credit rating and collateral.

Recently, the Ministry of Finance submitted to the Government a draft amendment with several proposals, such as: postponing the implementation of regulations on determining the eligibility of professional securities investors, and requiring a one-year re-evaluation of credit ratings instead of immediate application.

The Ministry also proposed allowing businesses to extend the repayment period for bonds, but not by more than two years compared to the initially announced term. In 2023, approximately 309 trillion VND of bonds matured, of which 119 trillion VND were real estate bonds, according to data from the Vietnam Bond Market Association.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, assessed that if the draft amendment to Decree 65 is approved by the Government soon, it will be a timely solution to ensure that bonds continue to be an important capital channel, supporting the recovery and development of the real estate market in a safe direction. Meanwhile, Dr. Dinh The Hien believes that if the amended Decree is approved, it will create room, allowing issuers, especially real estate companies, banks, and securities companies, more time to address issues related to bonds.

Secondly, social housing will receive more attention in the future. Social housing is seen as a solution to break the current deadlock, simultaneously addressing real needs and helping the market overcome the crisis. However, for a long time, the social housing segment has faced difficulties due to cumbersome procedures and lengthy processes, while the profits are very low compared to commercial housing projects.

To help balance the market and meet the housing needs of the people, the Government is aiming to build more than 1 million social housing units by 2030; introducing many policies to encourage low-income earners, such as a 2% interest rate subsidy for houses under 2 billion VND; amending the Housing Law to tighten regulations on secondary transactions of social housing, and requiring localities to allocate land for this type of housing when developing planning. The bidding and auction processes for land, and procedures for determining selling prices for low-income earners are being reformed to be faster and more efficient.

Recently, the Ministry of Construction proposed a credit package of 110,000 billion VND for social housing; the State Bank of Vietnam also announced a package of 120,000 billion VND with interest rates 1.5-2% lower than current rates for this type of housing.

Assessing the impact, Yuanta Securities Vietnam believes that these credit packages could provide impetus to revive the market. Businesses with large land reserves for social housing (for example, Hoang Quan Real Estate) will benefit. However, the company also acknowledges that administrative procedures for project development remain a concern, and developers may continue to face difficulties in securing funding for new projects.

Furthermore, Yuanta also believes that industrial park real estate developers who own land for worker housing will also benefit in the long term. Although worker housing accounts for only a small proportion of the total net asset value of these companies, market sentiment has become positive thanks to new policies, which could potentially boost stock prices. Moreover, building worker housing within industrial parks is likely to increase attractiveness to tenants and thus support core business operations.

Some businesses also consider the upcoming separate credit package for social housing as good news. For example, the 120 trillion VND package, despite its relatively low interest rate, has a positive impact on the psychology of both developers and homebuyers, especially given the sharp increase in lending interest rates and limited real estate credit. However, what businesses are currently concerned about is how to implement the package to ensure easy access and disbursement for borrowers. Furthermore, businesses propose that policies and legal frameworks for social housing continue to be promptly addressed to facilitate project implementation.

Thirdly, another expectation from businesses is that interest rates will not increase this year, or if they do, it will only be by 1%.

Many banks have now reduced deposit interest rates by 0.3-1% per year, bringing the overall deposit interest rate down by 1-2% per year compared to last year, fluctuating between 8.7-9% per year. The decrease in input interest rates and the abundance of deposits are creating favorable conditions for banks to lower lending interest rates. Previously, following a meeting on credit for the real estate market held by the State Bank of Vietnam, Vietcombank leaders stated that commercial banks had met and unanimously agreed to lower deposit interest rates, thus providing a basis for reducing lending rates to businesses.

Previously, rapidly rising interest rates caused significant difficulties for the market, forcing those looking to buy a home to almost postpone their plans. Therefore, when interest rates show signs of cooling down, it will help boost market liquidity and reduce the pressure of loan interest for both homebuyers and businesses.

Previously, DSC Securities noted that while the market faced many difficulties this year, it also created opportunities for large, financially sound companies to acquire projects at low prices. "If they can acquire these projects at low prices and preserve their returns, this will be a driving force for strong growth in the next real estate boom," DSC stated.

This unit recommends that businesses should buy and merge projects at low prices in the second and third quarters when bond maturity pressure is strongest. In addition, DSC experts also predict that by the end of this year, when the money supply shows signs of easing, there will be potential for recovery for businesses.