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Feb 17, 2023 / 18:01

Real estate prices must drive the market forward: PM

Solutions for the market should follow the law of supply and demand.

Real estate prices must be the driving force to promote market development, not suppress it.

Prime Minister Pham Minh Chinh stressed the view in a national conference held today [February 17], discussing measures to support the property market development.

 Prime Minister Pham Minh Chinh at the conference. Photos:Nhat Bac/VGP 

The conference was held amidst a real estate market crisis that has persisted for almost a year. In 2022, the number of bankrupt property firms surged by 40%, and even the industry's top players have resorted to desperate measures, such as job cuts, layoffs, and halting or selling projects, to stay afloat.

In a recent real estate market assessment, Chinh pointed out several areas for improvement, such as an imbalance in the supply and demand of properties, focusing on high-end segments, and limited options for those in the middle and low-income groups. Furthermore, real estate prices do not reflect the average income of people and remain out of reach for most of the public.

While legal issues and difficulties in securing funding remain challenges in the market, the response from regulatory agencies, businesses, and banks has been slow, said Chinh.

In this regard, Chinh noted several agencies have hesitated to take responsibility and address the issues. Meanwhile, real estate businesses, a key player in the market, need to be more flexible to solve their problems promptly.

To address these challenges, Chinh stressed the necessity to follow the market's supply and demand laws and adopt a spirit of collaborative problem-solving to ensure safe and sustainable development.

"The government does not plan to intervene to rescue any party, and instead, encourages regulatory agencies, businesses, banks, and customers to work together to find solutions," Chinh continued.

He also mentioned the importance of sharing benefits and risks among the State, people, and businesses, adding an imbalanced structure would result in instability and hinder market development.

 Overview of the conference. 

According to the prime minister, real estate should be treated equally with other industries, and therefore, it is crucial to find a balance between supply and demand, which is reflected in the price. "Real estate prices should act as a driving force to promote development rather than suppress it," he continued.

He requested regulatory agencies to review the existing legal frameworks to address emerging issues. Banking and financial institutions have also been tasked with smoothing capital flows and resolving credit problems in the market.

The Prime Minister emphasized that real estate businesses must take responsibility for solving difficulties caused by inaccurate forecasts, poor market development, and inadequate investment portfolios.

"Companies must restructure reasonable price segments to promote liquidity and strive for sustainable growth," he said.

The Prime Minister noted that business has ups and downs, and profitability is only sometimes achievable. "Businesses should avoid focusing solely on profits and instead contribute to the common good," Chinh continued.

The Prime Minister has urged banks to reduce input costs, deposit interest rates, fees, and charges, and restructure debt groups to support economic development. "The development of the banking sector is directly linked to the well-being of the economy," he said.

Furthermore, authorities at all levels have been assigned to clear obstacles in procedures, expedite the development of plans, and strictly implement planning while adjusting projects to suit local conditions and situations.

The Government has formulated its plan for housing development, including affordable housing for workers and low-income people. The Government is also considering a credit package of VND100 trillion ($4.2 billion) for this sector that has been proposed by the Ministry of Construction and the State Bank of Vietnam.

Pham Thieu Hoa, Chairman of the Board of Directors of Vinhomes, said the demand for home ownership is still very high and will continue to increase while supply continues to stay low. He cited legal procedures and limited loan capital as major real estate businesses' challenges. He warned that many companies would be forced to close without timely solutions, and supply in the market would become even more scarce.

"To address these challenges, businesses are calling for the government to implement specific measures to smooth capital flows and remove legal obstacles, which are the two biggest bottlenecks hindering the market," he said.

Bui Thanh Nhon, Chairman of the Board of Directors of Nova Real Estate Group, proposed that the Government allow banks to extend debt repayment terms for real estate projects by 2-3 years and not consider their debts as default, to give companies more time to wait for the market to recover and complete their projects.

"This would help prevent a large portion of the economy's outstanding loans from turning into bad debts," Nhon said.

In addition, he also raised concerns about interest rates, which have increased rapidly since the end of last year, with some loans seeing an increase of nearly 30%, calling on commercial banks to reduce profit margins to support real estate businesses.