Vietnam Real Estate Growth Limited By Regulatory Environment

The key factors limiting Vietnam's real estate market are: a lack of transparency, access to funding and the legal framework. Heeding the lessons learned by Vietnam's counterparts in the Asian property sector should advance the position of this emerging market. See the following article from Property Wire for more on this.

Improved legal and financial frameworks are needed if Vietnam’s emerging property market is to grow into a sustained real estate environment, it is claimed.

The country’s real estate sector will continue to grow and attract investors in 2010 but potential problems such as rapid urbanization, environmental pollution and supplying sufficient low cost housing needs to be addressed, a two day conference heard.

Tran Kim Chung from the Central Institute for Economic Management, part of the Ministry of Planning and Investment, said Viet Nam’s property market has recorded several achievements in recent years, contributing greatly to the country’s urbanization, improving urban landscapes and raising people’s living standards.

He told delegates at the conference in Ho Chi Minh City that the real estate market plays a crucial role in the country’s economy and its growth has attracted a great amount of investment capital. Its growth will elevate and stimulate other economic sectors, he said.

But the conference heard that the domestic property market still suffers from several shortcomings, including a lack of legal framework for real estate investment, real estate bonds, secondary real estate mortgages and real estate saving funds.

Despite commercial banks regularly granting credit to customers, the market still needs more funding, Chung said.

He said another problem with the sector was the lack of transparency, as it mainly depended at present on sellers, with buyers sometimes not having enough information on their purchases.

Chung called for the law on property registration to be improved and said issues relating to property finance and property information should be examined. Training is also needed to make the sector more professional, he added.

Also attracting foreign investment is vital. ‘We will continue to gradually expand the range of foreign investors involved in the property market. This is one of the important tasks in attracting resources to the domestic property market,’ he claimed.

Developers support the drive for change. Le Chi Hieu, chairman and general director of Thu Duc Housing Development Corporation, said new policies are crucial for the real estate industry to move forward. ‘We need a stable and correct assessment of the real estate market and to concentrate more on developing suitable policies relating to the property sector and real estate trading,’ he said.

Alan Tong, former chairman of the International Real Estate Federation, said Vietnam could learn from other Asian real estate markets such as China and Singapore and avoid mistakes that they have made.

Though the transparency in legal and regulatory environment has greatly improved, more needs to be done to help the property sector more attractive, said Boaz Boon, vice president of CapitaLand Limited. He said investment performance measurements, availability of information on market and transaction processes needed to improve urgently.

‘We cannot expect the market to be transparent quickly but it should move to a semi-transparent phase soon and move further from there,’ he said.

This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.

Vietnam’s Inflation Accelerates to Eight-Month High

By Jason Folkmanis

Dec. 24 (Bloomberg) -- Vietnamese inflation accelerated to the fastest pace since April as higher rice prices pushed up food costs while an accelerating economy fueled domestic demand.

Consumer prices rose 6.52 percent this month from a year earlier, according to figures released today by the General Statistics Office in Hanoi. That compares with November’s 4.35 percent inflation rate and is the fourth straight month of gains. Prices climbed 1.38 percent in December from November.

Vietnam’s central bank announced an interest-rate increase on Nov. 25, becoming the first in Asia to raise borrowing costs after a loan-subsidy program led to what Nomura Holdings Inc. described as an overheating economy. Growth accelerated to 5.8 percent in the third quarter, the fastest pace this year.

“It’s going up quickly, but we have to keep in mind that Vietnam can maintain fast growth even with inflation of as high as 8 or 9 percent,” said Ly Xuan Hai, chief executive of Ho Chi Minh City-based Asia Commercial Bank, Vietnam’s third-biggest listed bank.

The central bank’s latest rate increase took effect on Dec. 1, with the benchmark rising to 8 percent from 7 percent. The State Bank of Vietnam had cut the rate to 7 percent in February from as high as 14 percent in October 2008.

“It’s too soon to make a decision on interest rates,” Hai said in a telephone interview today. “We should wait for the January figures.”

‘Not Quelled’

The acceleration in inflation last month, from 2.99 percent in October, shows macroeconomic instability in Vietnam, Moody’s Investors Service said earlier this week.

“Inflationary expectations have not been quelled,” Moody’s said in a Dec. 21 statement.

Overall food prices rose 5.8 percent in December from a year earlier, compared with a 3.5 percent gain in November. Rice prices in Vietnam, the world’s fifth-biggest consumer of the grain, have increased “substantially” since early November, the U.S. Agriculture Department said in a Dec. 11 release.

Domestic demand has seen a “full recovery” in Vietnam, Goldman Sachs Group Inc. said this month, helping to drive economic growth that may reach 8.2 percent next year, according to the New York-based bank.

Prices in the category including construction materials rose 12.6 percent in December, compared with an 8.4 percent increase in November.

‘Burgeoning Real-Estate’

Vietnam has a “burgeoning real-estate sector,” said Don Lam, a director of London-listed property fund VinaLand Ltd., in a Dec. 21 stock-exchange release. Residential projects in the country have “witnessed strong demand and rising prices,” Lam said.

Inflation may reach 14.2 percent by the third quarter of 2010, Nomura said in a Dec. 16 report, predicting that the Vietnamese government will shift its focus to fighting price increases from boosting growth.

A weaker currency “is likely to add to inflationary pressures and increase the need for additional rate tightening,” said Sonal Varma, a Mumbai-based economist for Nomura, which expects the Vietnamese central bank’s benchmark interest rate to reach 11 percent by the fourth quarter of 2010.

To contact the reporter on this story: Jason Folkmanis in Ho Chi Minh City at folkmanis@bloomberg.net