While acknowledging long-term growth potential driven by infrastructure development, economic expansion, and rising income levels, he cautioned against expecting a quick rebound in 2024.
Mr. Tuấn believes the market will face significant pressure throughout next year, meaning a smooth recovery is unlikely. This sentiment reflects the ongoing challenges in the sector, including tighter credit conditions and concerns about property affordability.
However, Mr. Tuấn remains optimistic about the long-term outlook. He sees land prices continuing to rise in the future, with potential for increased transaction activity as market conditions stabilize. This suggests that while 2024 might be a bumpy ride for the real estate market, the underlying fundamentals are strong enough to support future growth.
JOURNALIST: - In your view, how will the recent passage of the Real Estate Business Laws and Housing Laws impact the real estate supply, specifically, and the market in general?
Mr. ĐINH MINH TUẤN: - Firstly, considering the pressing need for change in the real estate market to ensure a sustainable supply, the Housing Law and Real Estate Business Law are expected to have a significant impact. The most immediate demand is observed in the social housing (NoXH) and low-cost commercial housing segments. With the passage of these laws, it is anticipated that it will become easier for these products to enter the market, eliminating procedural hurdles in project permission applications and removing conditions for buyers. This, in turn, is expected to stimulate supply.
Secondly, regarding the land market supply, our preliminary assessment suggests that more than 90% of the market will likely be affected by the new laws. The regulations tightening planning for urban areas of types 1, 2, and 3, and prohibiting the division of plots for sale, will have a short-term impact on planning. However, in the long run, it is expected to result in better, more sustainable practices and contribute to reducing land speculation or "fever."
- Sir, could you please provide more specific details about the impact of significant changes on the social housing segment?
- Firstly, the removal of the 10% limit on commercial housing within a project is a notable change. This means that investors now have the flexibility to allocate a portion of the land fund for commercial purposes beyond the previous 10% restriction. The previous regulation, imposing a 10% limit, led to various challenges for social housing project development units, including cumbersome procedures, limited profits, and a lack of motivation to undertake projects. The new law's provision, allowing businesses to allocate 20% for commercial development with no profit cap, has injected more motivation into investors.
Secondly, the regulation concerning land use rights and proof of origin is crucial in eliminating supply constraints. Many investors face legal issues preventing them from developing projects, thus hindering the creation of new supply for the market. The new regulation aims to address these legal problems and facilitate increased supply.
Thirdly, the expansion of eligible subjects to purchase social housing is another significant change. Previously, household registration was a requirement, and certain subjects were restricted. However, with the expanded eligibility criteria, there is an increase in demand, indirectly stimulating the supply of social housing. This expansion serves as a foundation for the projection that by 2030, there will be a rise in Social Housing projects, especially considering the high population density in Hanoi and Ho Chi Minh City.
- In your opinion, sir, do you believe there is a need to enhance and reorient the land fund for the development of social housing?
- The state has introduced numerous resolutions and decrees to support social housing development, but the success of these initiatives depends on the perspective of the investors who are the implementers. From the investor's viewpoint, the conditions must be both suitable and profitable to attract their interest. For instance, the state's policy of allocating land to investors while limiting their profits to only 10% can be demotivating. Moreover, the prolonged approval procedure, spanning several years, raises concerns for investors about potential risks. This situation has led to the gradual disappearance of apartments priced at VND 40 million per square kilometer in Hanoi and those over VND 50 million per square kilometer in Ho Chi Minh City. Instead, investors are shifting their focus to high-end and super-luxurious apartment segments, a trend observed in the two largest cities in the country.
Currently, Ho Chi Minh City is planning the construction of Belt 3 with 4-5 connecting highways. The initial focus is on developing land funds in satellite cities and suburban areas. In Hanoi, with Ring Road 3 already in place, the emphasis is on Ring Road 4 projects. Therefore, affordable housing tailored to the budgets of buyers in areas surrounding urban centers is expected to be the primary trend. The average population density in the country is 320 people per square kilometer, while in Hanoi, it is 2,900 people per square kilometer, and in Ho Chi Minh City, it is even higher at 4,300 people per square kilometer. Consequently, the development of satellite urban areas and the expansion of the population into suburban areas appear to be inevitable. The state should consider allocating land funds around satellite urban areas for the development of affordable and social housing projects, alongside the expansion of transport infrastructure and road networks to facilitate connectivity.
- Sir, how would you assess the real estate market in 2023?
- Looking back at the real estate market in 2023, three main issues come to the forefront. Firstly, a significant capital shortage is plaguing the real estate market, with the maturity of bonds for real estate becoming a pressing concern and exerting pressure on businesses. Despite the government's issuance of Decree 08 to alleviate some of this pressure temporarily, the challenges are expected to persist in the coming years.
Secondly, access to credit capital for real estate businesses is becoming even more challenging due to limited credit availability, coupled with a rapid and high increase in bank interest rates. This situation is anticipated to persist at least during the first two quarters of 2024.
Thirdly, there is a noticeable shortage in supply across all segments of the market. The diminished capital availability directly translates to a decrease in supply, contributing to fluctuations in market psychology. Even the key market segment, apartments, is experiencing a subdued atmosphere. In both Hanoi and Ho Chi Minh City, the supply is restricted to approximately 14,000 units, predominantly in the middle and high-end segments. This inadequately caters to market demand, particularly when buyers predominantly consist of low-income individuals seeking affordable housing solutions.
- Thank you very much.
