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Myriad reasons lie behind buyers being unable to pay the original price for new houses.

BDS5

Hundreds of new housing projects have been implemented in Vietnam in recent years. But in the country’s major cities it has proven difficult for people to buy houses at the original price, given the role of intermediaries and speculators.

With a population of 7 million and a growing number of immigrants, Hanoi faces a range of issues, especially as regards accommodation. Housing and land prices in the capital are still quite expensive, despite the market going through a rather quiet phase

Mr Nguyen Van Thanh recently heard about a house for sale in the Green House project belonging to the HUD Real Estate Investment and Development Joint Stock Company (HUD Land). As he is interested in buying a house, he was aware that sales plans hadn’t been made public as yet. He called the vendor, who proposed the high price of some VND17 million ($885) per square metre, even though the houses are still under construction. The vendor, he said, assured him they could take care of the legal procedures.

But when VET approached HUD Land to check on the information given to Mr Thanh, a company representative said it was incorrect and that the Green House project would announce a sales plan at the end of August. He couldn’t, at this time, release any details. People like Mr Thanh, who hope to buy a house at the original price, would be disappointed at hearing the news.

According to the population and housing census released in 2009, the amount of housing has increased 1.5-fold since 1999 and stands at 500 million square metres. The amount of housing, and the quality, has clearly increased significantly.

Hanoi’s real estate market is short on supply, and many projects have been delayed. The inevitable result is that buyers must deal with the activities and plans of investors, as well as secondary investors, and often end up paying two or three times the original price.

According to real estate experts, investors more often than not fail to publicly announce the purchase price and when the houses can be purchased. When projects are completed, almost all of the houses have already been sold.

Mr Nguyen Khac Tho, Deputy Director of the Hanoi Department of Construction, said that real estate prices are very high compared to income levels. “In the second quarter of this year the real estate market has recovered, and in the third quarter prices will increase by 15 per cent to 20 per cent compared to the second quarter,” he said. “This is mainly due to intermediaries being involved in buying and selling and because of speculation.”

Property research companies have said that information about property projects in Hanoi is rarely announced, with most sales being made through word of mouth.


An official from the Ministry of Construction said that people in Hanoi cannot purchase houses at the original price because of excessive demand. When the Nam Cuong Group released information on houses for sale, thousands of people queued up for the chance to buy one at the original price. But supply was nowhere near demand. While most people are happy to queue up, they don’t often get the opportunity. Investors must earn a profit from their projects. They incur costs relating to land, construction, and capital, as well as unofficial costs. A representative of a real estate group said that his group invested in a project in 2003 and is still dealing with many procedures. “Project costs are huge,” he said. “We need to recover our investment.”

Hanoi’s policy is to encourage people to move away from the city centre, and most land transactions are found in Ba Vi and other areas on the city’s outskirts. But most are investment properties.

Many believe the problems exist not just because of the behaviour of investors but also because of the actions of buyers. According to Mr Nguyen Tran Nam, Deputy Minister of Construction, most buyers try to directly contact investors to seek information about projects, and ask about relationships and intermediaries. This pushes prices higher, and most buyers are surprisingly willing to pay more.

Much needs to be done for a solution to be identified. A representative from the Hanoi Department of Construction made a few observations. Firstly, competition in Hanoi’s real estate market is low. The Real Estate Law stipulates that buying and selling is to be done via a real estate transaction floor. But the requirement is new and yet to take hold. The Hanoi People’s Committee therefore needs to bolster its inspection and supervisory activities.

Secondly, controlling, inspecting and tackling violations in market activities, especially in transactions, haven’t been carried out seriously. Many policies are in effect but their implementation is slow. Real estate management must be better and performed faster.

Thirdly, the government and the Ministry of Construction should require capital plans be completed earlier and a roadmap be prepared for implementing the plan in all building and invested projects.

More than 700 projects have been delayed while investors wait for the Hanoi’s master plan to be completed. The lack of supply will therefore continue. When the Hanoi general plan is completed, it will have a major impact on the city’s real estate market as many projects that are suitable will be licensed and get underway.


An optimistic sign for the property market was the introduction of Decree 71/2010/ND/CP on August 8, replacing Decree 90/2006/ND-CP from 2006, regulating issues relating to housing and land such as the real estate trading floor, capital mobilisation by investors, housing mortgages, and so on. The property market is certain to change under the new Decree, which takes into account the benefits of investors and buyers alike.

vneconomy.

 

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