The new regulations in tandem with construction materials' rising
prices is making it difficult for developers to survive as the real
estate market continues to chill for the second straight quarter.
A leader of the Vietnam Construction and Export-Import Corporation
(Vinaconex) said an increase in construction materials' prices, along
with banks' restricted lending policies, had made construction companies
broke, forcing them to liquidate.
Construction materials'
prices increased by 30 to 40 percent during the past few months while a
new chill in the property market caused bidders to abandon their
projects after their proposals concerning the adjustment of construction
materials' prices were refused by house owners.
The
procedures for State funded construction projects, concerning price
adjustments, takes a long time, making the supply of housing projects
lag behind schedule which in turn adversely impacts the real estate
market.
The prices of construction materials including steel, cement and housing equipment continue to soar.
Construction materials account for 40 to 70 percent of the total
estimated capital for building projects, according to the Institute
of Construction Economics .
Property markets primarily
depend on monetary and credit policies, according to a Ministry of
Construction report that was submitted to the Government Office.
Banks began increasing lending interest rates and applying greater
restrictions on mortgage loans starting in July, following a warning
from the State Bank of Vietnam (SBV) that urged financial institutions
to be prudent with issuing loans for real estate projects.
The warning was issued in response to findings that real estate loans
accounted for more than 5 percent of the bad debts that had incurred at
several commercial banks in the country.
The SBV reduced
the short-term deposit proportion reserved for long-term loans from 40
percent to 30 percent and specified real estate loans as high risk.
Vinaconex deputy director Nguyen Dinh Thiet said commercial banks only
lent loans for up to 10 years, and total outstanding real estate loans
were restrained to 10 percent.
Commercial loans provide
the primary impetus for the property market, reports the Collier
International Company. Buyers are hesitating to borrow money from banks
to purchase homes, while banks increased their interest rates that range
from 17.5 to 18 percent per year.
Investors have begun to
secure capital from other sources including mobilising cash from
secondary investors and issuing bonds. Secondary investors are not so
interested in investing in housing projects, as the chill in the real
estate market continues./.
