Deputy Minister of Construction, Nguyen Tran Nam, speaks with DTiNews about rising prices and the domestic real estate market.
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| Deputy Minister Nguyen Tran Nam |
Have price hikes in petroleum and electricity impacted the real estate market?
Price increases will inevitably impact construction projects. Construction materials are greatly affected by the transport costs.
Real estate prices will increase along with this trend. This is unavoidable. However, the important thing is there is still a strong realty market and people still buy and sell.
Has the rise in prices of construction materials led to financial difficulties which have slowed down construction projects?
Basically, construction materials remain abundant. Most construction materials are locally made, instead of being imported. Due to the material price hikes, customers will have to accept adjustments in the price of real estate. The rise in the price of construction materials is inescapable. So the real estate market has no choice but to fall in line. They still must carry out their projects because if they just sit to wait for lower prices, their losses will be much higher. For this reason, I think it will not greatly affect the pace of construction projects.
You said the price hike is inevitable. Nevertheless, a schism now exists in the Vietnamese market. While companies in the north have increased prices of real estate, southern companies claim that raising prices will cool off the market. What do you think?
The laws of supply and demand decide the price of land. Right now, demand is lower in the south than it is in the north. Many northerners spend their own money to buy homes, while people tend to borrow in the south. So there is a fundamental difference between the two regions.
What do you think are the impacts of increasing foreign currency and gold prices on the property market in the recent past?
Currently, there is a very high savings rate among the people of this country, and real estate is considered a safer investment than gold, foreign currency, or risky securities.
Real estate is a tangible asset. In reality, both property prices and trade have risen sharply in the past few weeks.
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| "There is still a strong realty market and people still buy and sell." |
Is the rise in real estate prices temporary? Some say that the tightening of fiscal policy will cool down the real estate market in both the long and the short term.
The tightening-monetary policies are short term. Reducing money supply by increasing lending interest rates is a way to discourage lenders from giving too many loans. This is a double-edged sword, because as credit is made more scarce, less investment will be made, which will in turn affect economic growth.
The Government has instructed banks to gradually lower interest rates on loans, but within a controllable level, in order to boost investment in the real estate market.
Banks have reduced loans for real estate borrowers, but money reserves among the people remains large. However, we cannot discern whether it is exactly equal to the reduction in credit due to new financial policies. Still, the property market is healthy, and property prices are increasing.
What is your forecast for the real estate market in the coming years?
I do not predict a booming market, but it will not be much affected by recent changes in fiscal policy. Yes, a tightening of credit will make the property market more sluggish, but it will still outperform other sectors. Also, when the credit policy is loosened, the real estate market will heat up, but not as quickly as other sectors.
Credit only impacts the site clearance and foundation building of construction projects. After that, capital for the real estate market will be mobilised from buyers, not banks. Meanwhile, most of the money in this market is coming from people’s savings. So the real estate market will operate normally.
A large number of houses for low-income earners will be provided in 2011 at reduced prices. Will these be influenced by the fluctuations in the market?
I think that these homes will help to stabilise the market. It cannot unilaterally drop the prices of commercial apartments, but at least low income housing can influence the prices in other segments. Generally, houses for low-income earners help to stabilise the real estate market, more so than luxury houses.
