The Vietnamese Government is ready to announce new real estate policies that have several developers concerned. In an effort to reduce land and apartment prices, the government may actually be freezing market prices in their current elevated place. Le Hoang Chau of HCM City Real Estate Association is concerned that new government laws will make it even harder for low-income families to purchase homes. The new regulations include a progressive tax scale as well as advising banks to reduce the number of home and property loans. The progressive tax scheme is expected before the end of the first quarter of 2008.
Many real estate companies are concerned that these policies are strong enough to effectively “kill” the property market. Banks will stop providing loans for the purpose of buying homes and land. This will eventually affect demand. Once demand is affected property developers will have to slow down. Eventually prices will be pushed up instead of down like the government is hoping. The new policies do have the potential to work, but should be introduced gradually according to Nguyen Dang Son, deputy director of the Institute of Urban Research and Infrastructure Development.
Middle and low income persons make up almost 80 percent of the nations population. Recent studies have shown that the majority of developers in HCM City are not focusing on developing properties that would cater to this demographic despite the size.
It is obvious though that changes are needed. Real estate agents in HCM City have reported property increases of 100% in some areas. These price hikes are the result of high demand coupled with low supply. When the amount of money flowing into the market exceeds the number of units capable of accommodating the new buyers, demand increases as do prices.
