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Vietnam govt package aimed at boosting property market in 2009

At the heart of the package will be investment in low cost housing and infrastructure to help the construction industry which has been hit hard by the global economic downturn.

Pham Sy Lien, vice chairman of the Construction Association, said recent cuts in both deposit and lending interest rates will also help the struggling property sector.

'Like other countries in the world, real estate is a thermometer of the economy. It's warm when the economy is growing, it's cool when the economy is slowing,' he said.

He added that although economic growth rates are falling, they remain above zero as inflation is also falling thanks to Government efforts.

But he warned that even when the real estate sector improves, real estate prices cannot be forecast. He believes that too many property investors have been living a dream in terms of the kind of profits they expect to achieve from property investment.

The days of getting a 400% profit over a relatively small timescale are now well in the past, he said. Such super profits have prevented developers from building low cost housing but now they realise that this sector can save the industry.

In general the price of urban property has fallen by 30% according to the Ministry of Finance. Prices of high end buildings fell by 20 to 30%, as did prices for land plots and villas.

However prices are holding for property worth under VND1 billion and small floor space apartments.

Officials believe that 'unhealthy trading' on the unofficial market where investors only focused on high level housing which accounts for just 5% of the property market has not helped.

When the Government tightened credit policy to curb inflation, these investors rushed to sell their properties, pushing supply far above demand and prices plummeted.

According to a recent survey by the Research and Advisory Real Estate Company VietRees, more than 90% of leading property experts believe that the sector will pick up but they can't predict when.