Builders hopeful property market will recover in 2009

With the government loosening the credit policy and interest rates plunging, some property developers expect the real estate market to recover this year and are poised to begin new housing projects.
Tran Van Thanh, general director of Vietnam House Joint-Stock Company, said he believed the market would be better this year because of the credit loosening.
The State Bank of Vietnam has lowered its benchmark rate to 7 percent from 8.5 percent, effective Sunday, the sixth rate cut since October.
Thanh said his company plans to begin construction of 1,630 apartments in Ho Chi Minh City’s District 9 by the third quarter of this year.
Dang Hoang Vu, general director of Thanh Binh Real Estate and Trade Company, said it is looking to raise VND600 billion (US$34 million) to build 1,500 condominiums in District 9 and 100 villas in Cu Chi District.
Site clearance is complete, he said, adding the first one targeted medium-income earners, with each apartment costing VND700 million to 1 billion ($40,000-57,000).
Nova Real Estate Investment Corporation (Novaland) last December commenced work on a $500 million project in District 7.
Sunrise City will have 1,800 luxury apartments and a 60,000-square-meter shopping mall.
Nguyen Xuan Chau, general director of Novahomes, a unit of Novaland, said the company is working on a strategy to promote the condos, adding they could be sold at $2,500-3,000 a square meter.
Le Hoang Chau, chairman of the HCMC Real Estate Association, said the association has asked the central bank not to slap penalties on its members who fail to repay bank loans in time.
It had also asked the bank to lower interest rates to the current rate, he said.
According to a central bank report, by November 2008, banks’ outstanding loans to the property sector was VND115 trillion (nearly $6.6 billion), 73.9 percent of which in Hanoi and HCMC.
Chau said since most property companies in HCMC are small- or medium-sized, they would find it very difficult to survive if banks do not give them a helping hand.
Tax concerns
The director of a real estate company in HCMC, who wished to remain unnamed, said property developers would face difficulties this year since official land values have been doubled in some areas.
“This will make site clearance more difficult and land-use taxes will double. For instance, a 10-hectare project in District 2 will be taxed VND20 billion ($1.14 million) compared to VND10 billion before.”
Vietnam does not allow formal land ownership but grants land use rights, which confer the same rights as freehold property.
Thanh Binh Real Estate and Trade Company’s Dang Hoang Vu said an increase in land values and the new capital gains tax on property would put developers under great pressure.
With the introduction of the new Personal Income Tax Law on January 1, people owning more than one house will have to pay a flat 2 percent tax when they sell a house or 25 percent on the profit on the sale.