Policies to stir up the real estate market in 2016

The restriction on real estate credit was implemented according to the roadmap until 2018, but it has had a strong impact on project developers as well as the entire market last year.

Credit restrictions on real estate

In January 2016, the State Bank of Vietnam (SBV) began soliciting comments on the draft amendment to Circular 36 regulating limits and safety ratios in the operations of credit institutions and foreign bank branches.

This draft amendment raises the risk coefficient in real estate business from 150% to 200% and sets out a roadmap to limit credit to the real estate market for 2 years. This is considered the first shock of the year regarding the prospect of capital congestion for the market. After many recommendations, the draft amendment is in the direction of keeping the ratio of short-term mobilized capital used for medium- and long-term loans at 60% in 2016. From January 1, 2017, it will be reduced to 50% and from January 1, 2018, it will be reduced to 40%.

This means that businesses need to prepare mentally for the situation of limited medium and long-term credit supply to the real estate market. Most businesses are concerned that if the capital flow to the market is limited in the short term, it may affect the psychology of the real estate market in 2016 and in the long term, it will seriously affect the following years.

The draft for comments on the real estate credit restriction rate is considered the first policy shock to the real estate business community in 2016. Photo: Vu Le

Announcement of list of mortgaged projects

In mid-July 2016, the Ho Chi Minh City Department of Natural Resources and Environment, along with the Department of Justice and the City Department of Construction, jointly announced a list of 77 real estate projects that were mortgaged to banks. This was the first time in the country that the management agency publicly disclosed the status of the projects so that people could clearly understand and avoid being cheated when buying a house, as had happened in some previous apartment buildings.

After this "revolution" in information disclosure, the real estate market is facing a series of challenges. Many businesses that are implementing and selling apartment projects in the area said they are having to constantly dispel doubts for home buyers because people mistakenly believe that the project is mortgaged, meaning that their assets are threatened and the investor's capacity is questionable.

Some businesses are concerned that the liquidity of the Ho Chi Minh City apartment market is at risk of declining. On the other hand, some businesses have reported that they have withdrawn their collateral, but the list shows that the project is still mortgaged. However, the inter-sectoral management agencies have all warned businesses with the message: "Investors must be responsible for information transparency from the beginning."

Not long after, Hanoi also announced a list of mortgaged projects similar to Ho Chi Minh City. This received the approval of the people, but experts recommended that a complete, detailed, and updated list should be announced to ensure objectivity and fairness.

Research on real estate taxation

In the fourth quarter of 2016, the real estate market received news that the Ministry of Finance is studying a property tax, targeting those who own a second home or more. According to the plan, from 2016 to 2020, the Ministry will develop a Tax Law on people who own multiple homes with the aim of preventing speculation and minimizing risks in the real estate market.

The objective of this tax is assessed positively, contributing to the sustainable development of the real estate market, preventing speculation and increasing revenue for the State budget. In a more positive scenario, the second home tax also directs secondary investors to choose to establish real estate businesses instead of individual businesses as at present.

The Ho Chi Minh City Real Estate Association assessed that tax is a tool to limit real estate speculation, avoiding market bubbles by collecting taxes is a good solution, however, it is also necessary to consider and be cautious when implementing.

End of 30,000 billion VND preferential credit package

The policy, introduced in 2013, provides 70% support for buyers of social housing and commercial housing priced under VND1.05 billion/unit, and 30% support for social housing projects that officially closed at the end of December 2016. After 3 years of implementing this policy, by the end of November 2016, 56,000 people nationwide had built houses, and nearly VND30,000 billion had been disbursed. In Ho Chi Minh City alone, 10,316 subjects were able to borrow the VND30,000 billion package with a total loan amount of VND7,032.3 billion, of which 10,308 individuals borrowed VND5,575.4 billion, and 8 social housing project investors borrowed VND1,456.8 billion.

However, the immediate termination of this preferential credit package also makes it difficult for low-income urban people to access housing, and also affects the affordable housing market segment. Currently, most social housing buyers have to access a credit package with floating interest rates like normal commercial housing.

The Trans-Pacific Partnership Agreement's dynamics

The US’s possible withdrawal from the Trans-Pacific Partnership (TPP) is considered one of the uncertain factors that could have a profound impact on the Vietnamese real estate market. Throughout 2016, the imbalance between supply and demand in the real estate market in major cities across the country, which is heavily tilted towards the high-end segment, is considered a consequence of the wave of taking shortcuts to seize the TPP opportunity.

Therefore, as soon as he took over the power from President Obama, Donald Trump did not rule out the possibility that the US could withdraw from the Trans-Pacific Partnership (TPP), leaving open the unknown that could impact many segments of the Vietnamese real estate market.

Experts predict that the absence of the US in this trade agreement will affect the shift of investment capital and production to Vietnam. Next, it will directly impact the real estate market in the medium and long term. In the short term, TPP can change the demand for high-end real estate, resorts, industrial parks, offices in large cities...

According to VNE