Cutting supply?

The first solution, cutting the supply, has been facing strong opposition from state management bodies and residents of big cities. While the demand for accommodation is increasingly high, it seems unreasonable to tighten the supply. Local authorities have pointed out that any attempt to cut supply will spoil programmes undertaken by big the cities like HCM City and Hanoi to resolve accommodation problems.

On the other side, investors believe that it is unfeasible to reduce the supply of accommodation. A large number of real estate projects have already been given the go-ahead, and investors have all budgeted capital for the projects, including borrowing from banks. Delaying the projects would lead the investors to bankruptcy.

Stimulating demand?

The solution has been applauded by the business circle and the management authorities; however, it depends heavily on buyers, who are not making any moves at the moment, while they wait for prices to fall further.

Only those who have urgent demand for accommodation are buying houses at the moment. Customers now only buy houses that have been completed, while most real estate projects are on paper only.

Meanwhile, experts say it is very difficult to persuade banks to fund people’s plans to buy houses as the banks lack capital for production and business plans. The banks can only reserve a small portion of their capital for funding real estate projects as they can only take back capital in 15-20 years.

Pumping money into enterprises?

Financial experts find the third solution unfeasible as it will worsen the situation.

Putting more capital into the real estate market would jam the capital flow, they said.

The Ministry of Natural Resources and the Environment believes that the injection of more money would help save real estate firms that face bankruptcy due to capital shortages. However, economists said that enterprises not financially capable enough to operate should be weeded out from the market, and it is the right time to do that.

Economists said that the real estate market is quite complicated, and it is unlikely that the current bad market situation will be resolved by one, two or three simple solutions.

Source: Vietnamnet