In order to curb inflation, the government has ordered banks to tighten real estate credit. Experts have expressed concern that this will freeze the real estate market as housing projects will not have capital to run on.

However, Deputy Minister of Construction Nguyen Tran Nam denied the opinion, saying that it is necessary to restrain the overly hot real estate credit and prevent high-risk loans, but this does not mean stopping funding real estate projects.

Nam said that in the last time, too much capital has been injected in real estate, pushing real estate prices to overly high levels.

“In principle, the estate market should not be overly hot, as it will cause big difficulties for all people, businesses and the government. The best scenario is to develop the real estate market at a suitable speed with suitable growth rate,” Nam said.

He added that the aims of the government now are to tighten public investments, cut unnecessary projects, more strictly control real estate credit, minimise real estate speculation, which is considered the main culprit of the ‘virtual real estate fever’ over the last time.

The government will still promote good project funding by helping investors to make more commodities for the market. Moreover, the government must also give financial support to people who really have a demand for accommodation in order to stimulate demand.

Dr Chu Thi Thuy Chung from the Ministry of Finance said that the government’s measures have helped drive back speculation. A lot of speculators in big urban areas have put properties back into transaction, and the real estate fever, beginning at the end of 2007, has cooled down.

However, experts have warned that the measures to cool the real estate market down may have an adverse effect: they may slow down the implementation of projects, resulting in an accommodation shortage, in which case market prices won’t go down as expected.

It is true that in some big urban areas, real estate priced have decreased by 10-15% as some speculators have sold houses and land. However, in general, real estate prices have not seen big changes. Property owners are not hurrying to sell properties now because they will still make profit if they sell later (apartment projects can bring the profit of 100-200%). The demand for houses, offices and hotels keeps increasing; therefore, it is very difficult to reduce the fever.

Nam from the Ministry of Construction also acknowledged that unsuitable measures may cause adverse effects: the demand keeps increasing, while the supply, decreasing.

Chung has suggested amending the current regulation that says investors can mobilise capital from outside only when they finish the construction of buildings’ foundation. She said that investors should be allowed to mobilise capital right after they finish site clearance.

Source: Vietnamnet