Pumping money into property firms – an unnecessary move: Economist Dinh The Hien
Amid the difficulties in the property sector, financial and economic specialists suggest that stimulus package for the sector is unnecessary.
It has been a tough time for the property market since mid-2022. Stagnant transactions, low liquidity and other negative developments have caused investors to be wary. Economist Dinh The Hien told The Hanoi Times about the future of the real estate market.
|Economic specialist Dinh The Hien|
There has been a public concern that investors should not purchase land and land assets. What do you think about this?
Property assets will remain the best investment channel for individual investors at the moment and even in 5-10 years. Along with bank savings, stocks, bonds, gold, and US dollars, real estate is among the few investable assets for Vietnamese investors.
Bank savings, the US dollar, and gold are often safe havens as they offer investors fair interest rates and allow them to preserve their money in difficult times. White real estate, stock, and bonds are indirect investments that enable investors to earn profits without directly interfering with the business's operation and administration.
Bond purchasing is not a favorite among Vietnamese people as bond interest rates are only a bit higher than saving interest rates and are a highly risky asset. Meanwhile, share trading is only for some because it requires professional knowledge and trading experiences to win over the market.
Those reasons make the property market the most penetrable for most investors. Buying a property asset is simple, and every investor, whether they live in the city or rural area, may easily keep track of their investments. Plus, Vietnam still has huge potential in its urbanization progress, which will drive real estate values upon the infrastructure development.
Therefore, the real estate market will continue to be the best investment channel in Vietnam. We should ask ourselves whether the first half of 2023 is the right time to buy properties instead of wondering if we should spend money on these assets.
Should investors buy property assets during the first six months of 2023, as you suggest?
First, we need to understand that land property speculation differs from investment. Speculative investors only care about the chance of a market uptrend. They often look for rare opportunities that merely exist on the market, buy them and sell them in a short time at higher prices for profits. However, the Vietnamese property market has been unsuitable for speculative trading since Q4/2022, and it will remain in 2023, so speculative investors may find it hard to perform this year.
|A real estate project introduced to customers in HCM City. Photo: Tieu Thuy/The Hanoi Times|
The market now is only suitable for investors that target to secure reasonably-priced assets for long-term ownership. In Q1 and Q2 of 2023, even inexperienced investors can see property prices will not go up, and they are not in a hurry to compete for cheap assets anymore as there is still time and a lot of options are still out on the market.
Many property developers and trading companies think buyers cannot make loans to buy houses because banks are forced to tighten their lending policies, thus dragging the real estate market down. But the fact is that there are no speculative investors at the moment, and they are observing the market. Even if banks ease their lending policies, investors will not seek borrowing.
Those factors signal that the property market will see liquidity keep declining in the year's first half.
Declining market liquidity means the property developers are still stuck in the difficult zone. Is it appropriate that these companies should be rescued?
As we live in a market-oriented economy with strict rules on finance and capital, there is no more room for state subsidy. Property companies choose to develop and sell their products on market demand, so they must follow the market-oriented economy's rules. If these companies decide to accept the State subsidy, it means the State will have full authority over the market prices and trading. The companies would not get such a thing because it violates their benefits. Therefore, it is unreasonable that they demand the priorities from the State.
It is wrongdoing if the State gives real estate businesses financial supports as it will destroy the economy. That money comes from the State budget, which is made of borrowings and tax collections. If the State decides to inflate the money supply to help these companies, the action may violate the rules on macro-economic management.
Property companies cannot make loans in short term because there are no rules that allow the State to do so. It is unnecessary to spend a large of money just to rescue these companies. The State plans to finance the manufacturing and production activities, which is the right solution to stop inflation, but it will take some time for the policy to take effect.
On the other hand, the State will make utmost efforts to prevent the consequences of the loans that real estate companies have made from hampering the economy and dragging the banking-financial system. The State has recently put several commercial banks under special control to ensure normal operations and liquidity. It is the same move that once happened in 2012 when the State decided to intervened in the banking sector to restructure weak banks and protect the financial system. Most cases are caused by property firms that cannot pay back their bank loans.
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