3 Expectations for the Real Estate Market

_{Market News | 27 March 2023}

The real estate industry report of Mirae Asset Securities Joint Stock Company recognizes that the government is actively looking for a direction for the real estate market. Currently, this market is facing many challenges when credit is tightened, the mobilization channel through bonds is controlled, and interest rates are high. Accordingly, experts at Mirae Asset expect three factors that, if implemented, can help reduce the market’s difficulties somewhat.

Firstly, Decree 65 will be approved to amend, helping to free up capital for businesses in the third quarter. Experts and businesses see that Decree 65 is tightening and is not suitable for the context, making it difficult for businesses to issue bonds as well as meet the requirements of a credit rating and guaranteed assets.

Recently, the Ministry of Finance submitted a revised draft to the government, which proposed many suggestions, such as delaying the implementation of the provisions for determining the identity of professional securities investors by one year rather than immediately implementing them.

The ministry also proposes to allow enterprises to extend the bond repayment term, but not by more than 2 years compared to the originally announced term. In 2023, about 309,000 billion dong of bonds will have matured, of which real estate bonds will need to mature for 119,000 billion dong, according to data from the Vietnam Bond Market Association.

Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, assessed that the draft amendment to Decree 65, if approved by the Government soon, would be a timely solution for bonds to continue to be an important capital channel. Support the real estate market to recover and develop in a safe direction. According to Dr. Dinh The Hien, the revised decree, if approved, will create room, allowing issuers, especially real estate businesses, banks, and securities companies, more time to process the issue bond issue.

Secondly, social housing will be more focused in the future. Social housing is considered a solution to break the ice at the moment when it solves real needs and helps the market overcome the crisis. However, for a long time, the social housing segment has faced difficulties because of complicated procedures and lengthy processes, while profits are very low compared to commercial housing projects.

To help balance the market and meet people’s housing needs, the government is aiming to build more than 1 million social houses by 2030, has introduced many policies to encourage low-income people, such as 2% interest rate support for houses under $2 billion, amended the Law on Housing to tighten regulations on secondary transactions of social houses, and at the same time stipulates that localities must allocate land funds for this type of housing when making planning decisions. Bidding stages, land auctions, and procedures for determining selling prices for low-income people are being reformed to be quicker.

Recently, the Ministry of Construction proposed a credit package of 110,000 billion VND for social housing. The State Bank also announced that there will be a package of 120,000 billion VND with an interest rate 1.5–2% lower than the current interest rate for this type of housing.

Assessing the impact, Yuanta Vietnam Securities Company believes that the above credit packages can create a driving force to revive the market. Enterprises with a large land bank for social housing (e.g., Hoang Quan Real Estate) will benefit. However, this unit also acknowledged that administrative procedures for project development are still a concern and that developers may continue to face difficulties in arranging capital for new projects.

In addition, Yuanta also believes that industrial park real estate developers who own land funds for worker housing will also benefit in the long term. While worker housing only accounts for a small portion of the total net asset value of these businesses, market sentiment has turned positive thanks to new policies, which could offer the potential to boost stock prices. Furthermore, the construction of worker housing in the industrial zone is likely to increase the attractiveness of tenants and thus support core business activities.

Some businesses also consider the coming of a separate credit package for social housing as good news. For example, with the package of VND 120,000 billion, although the interest rate is not high, it still has a positive effect on the psychology of investors and homebuyers in the context of a sharp increase in interest rates on time loans and limited credit for real estate. However, what businesses are interested in right now is how to deploy it so that borrowers can easily access and disburse it. In addition, the business also proposed policies and legislation for social housing to continue to be removed in a timely manner, helping the project be implemented soon.

Thirdly, another expectation of enterprises is that interest rates will not rise this year, or if they do, they will only be 1%.

Currently, many banks have reduced deposit interest rates by 0.3–1% a year, bringing deposit interest rates down by 1-2% a year compared to last year and fluctuating between 8.9% and 94% a year. Lower input interest rates and abundant deposits are creating conditions for banks to lower lending rates. Previously, after the State Bank’s meeting on credit for the real estate market, Vietcombank’s leaders said that commercial banks had met and agreed to lower the deposit interest rate to reduce lending rates for businesses.

In the past, the rapid increase in interest rates caused many difficulties for the market, and people who wanted to buy houses almost had to postpone their plans. Therefore, when interest rates show signs of cooling down, it will contribute to promoting market liquidity, reducing interest pressure on both homebuyers and businesses.

Previously, the DSC Securities side acknowledged that this year the market faced many difficulties but also created opportunities for large enterprises with good financial health to acquire low-cost projects. “If it is possible to acquire projects at low cost and preserve profits, this will be the driving force for businesses to grow strongly in the next wave of real estate,” said DSC.

This unit recommends that businesses buy, sell, and merge projects at cheap prices in the second and third quarters, when the bond maturity pressure is strongest. In addition, DSC experts also expect that by the end of this year, when the cash flow shows signs of loosening, there will be a potential for recovery for businesses.