Legal bottlenecks have affected the real estate market since the beginning of the year.
The number of successful transactions in the market has decreased sharply this year. The demand remains high, but the supply is low because of legal bottlenecks. Real estate firms are under pressure to seek land and sell products at reasonable prices.
Savills Vietnam’s CEO Neil MacGregor said real estate firms don’t have problems in demand, because it has always been strong over the last two years. The biggest problems lie in capital and land access.
“Clean and clear land banks” was the phrase that Will Hoc Nhan, deputy CEO of Alpha King said at the workshop organized by Forbes Vietnam last week when talking about project development in HCM City.
|The number of successful transactions in the market has decreased sharply this year. The demand remains high, but the supply is low because of legal bottlenecks. Real estate firms are under pressure to seek land and sell products at reasonable prices.|
“The idle land with an area of over 1 hectare in the central area of HCM City is very scarce. The site clearance is also meeting big difficulties,” he said. “The solution real estate firms apply is accessing new land, not only in the central area, but in suburban areas as well."
Ivor Cosimo Jencks from Hong Kong Land also commented that it is getting more and more difficult to find the land plots suitable to develop projects. To settle this problem, Hong Kong Land chooses to cooperate with Vietnamese investors who have clean land in hands.
Ivor said his enterprise still doesn’t have a plan to develop projects in other markets, except the traditional market of HCM City.
“International realtors still can see optimistic development in the high-end apartment segment, though the rules have changed a lot, the legal requirements have become stricter and it takes longer time to license projects,” he commented.
Not only foreign companies, but Vietnamese also have to face the lack of clean land. Novaland, which owns the biggest clean land fund, also complained about the land shortage.
Nguyen Thai Phien from Novaland said the company has to follow a new strategy on diversifying products and changing the investment area. It is moving ahead to access new land funds, including the suburban areas. Developing complete urban areas in satellite cities also is an optimal solution in current conditions.
Analysts say most enterprises access land in cities near Hanoi and HCM City to develop projects.
“It is logical because the real estate market develops in accordance with the ‘oil slick’ principle, from the center to neighboring provinces. Currently, the market is at the end of the cycle and the land in provinces is what investors, both big and small, are targeting,” said Pham Thanh Hung, deputy chair of CEN Group.
Authorities in northern Hai Phong City have discovered 253 projects which showed signs of land law violations.
Recent proposals in several cities to increase land prices, together with the current restrictions placed on new projects by local authorities, are expected to cause headaches for real estate developers.