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Land fever: bad consequences and new solutions

Since doi moi (renovation) in 1986, the Vietnamese real estate market has witnessed many ups and downs, including four “price fevers” so far.

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The first spell occurred in 1990-1992, and the second in 2000-2002. In fact, this was not a real fever but just a price increase as Vietnam shifted from a subsidy economy to a market economy. 

Under the subsidy mechanism, in theory, land did not have prices. However, during transactions of  assets attached to land, one could see that land had a price, but the prices were very low.  

During the two land price increases, prices in large cities increased by tenfold each time. 

The question is why land prices increases in the two periods were 10 years apart.  Each time the land prices increased to suit the market conditions of regional countries, this was interrupted by the enactment of the Land Law, including the 1993 Land Law and 2003 Land Law. 

The land laws lacked provisions that restricted land price increases. People stopped all actions to wait to see how the new laws would affect the real estate market. 

As of 2003, land prices in large cities had been nearly equal with those in other large cities in the region, including Jakarta (Indonesia), Manila (the Philippines), Bangkok (Thailand) and Kuala Lumpur (Malaysia). 

In 2003, the real estate market turned quiet because investors were shifting to the fledgling stock market. Many investors sought profits from the value of land held by equitized companies. When State-owned enterprises were equitized, the valuation of the land was still within the price framework set by the state, and therefore the prices were very low. 

With this trend, a bubble accumulated in the stock market. In 2007, the securities bubble burst and investors rushed to withdraw capital from the stock market to inject into the real estate market.  

The third land fever occurred in that 2007-2008 period, as a result of the massive capital shift from the stock market to the real estate market. 

The land price hikes in that period were believed to be the reason behind the high inflation. The solutions to curb inflation led to  a real estate market that did not have enough capital.  

The Government found solutions to recover the market in 2013. 

In 2014 and the next few years, the supply of high-end products was plentiful, while there was a shortage of affordable housing, even though demand was very high.  

The Government then gathered strength to settle the supply-demand imbalance in the high-end sector, which centered on bad debt settlement. Meanwhile, real estate developers began making investments in new real estate products, such as condotels, shophouses, resort villas, homestays and farmstays. 

In 2018, real estate market segments, including commercial housing, social housing and tourism, all faced difficulties because of the inadequate legal framework, or conflicts among related legal documents.  

In 2020, the housing market segment witnessed a fourth price fever with prices increasing by twofold.

Fourth land price fever 

The fourth land price fever occurred for several reasons.  

The year 2020 was the first year of the 2021-2030 development planning period, when suggestions about new urban development and new projects were made. The Government also decided to increase public investment in transport infrastructure. 

These factors had an impact on the real estate market, making the housing market segment more attractive to investors.  

Another factor that enlivened the real estate market was the increased land lot allocation for sale. Local authorities wanted to allocate land lots for sale to increase local budget collections, while small investors wanted to buy land for speculation. 

Second, the Covid-19 pandemic affected people’s incomes. People who have idle money sought new investment channels to improve their income, and the real estate market was seen as a safe choice. 

That is why investor demand for real estate increased but not for the purpose of living accommodation. 

Meanwhile, supply decreased because of problems in legal documents. A number of projects are still on the table, waiting for approval from state management agencies. 

Third, land prices increased because of speculation and profiteering. Many real estate brokers disseminated fake news to create artificial demand.  

If the fourth land price fever cannot be stopped, this will lead to high inflation. The reason behind the demand increase is speculation, and it still has not been settled. 

Vietnam needs to learn from experiences from industrialized countries and discover effective measures to prevent land price fevers, which are believed to be the beginning of economic crises.  

Land fever can also occur in countries with tight management like the US and Japan. A minor mistake is enough to lead to serious consequences which may take decades to solve. 

Land speculation also causes a social impact. The gap between the rich and the poor increases, and the poor don’t have opportunities to buy homes. 

The radical solution for Vietnam is eliminating speculation and encouraging investment in production and business. And in order to do that, it’s necessary to apple reasonable real estate taxes.

Source: VietnamNet

Source: https://e.nhipcaudautu.vn/real-estate/land-fever-bad-consequences-and-new-solutions-3345240/

Business

International arrivals in Vietnam surge over 12-fold year on year

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Vietnam has welcomed nearly 4.6 million international arrivals in the first five months of 2023, soaring 12.6-fold from the same period last year, the General Statistics Office (GSO) said on May 29.

International arrivals in Vietnam surge over 12-fold year on year hinh anh 1Illustrative image (Source: thanhnien.vn)

Hanoi – Vietnam has
welcomed nearly 4.6 million international arrivals in the first five months of
2023, soaring 12.6-fold from the same period last year, the General Statistics
Office (GSO) said on May 29.

Of the international arrivals, 88% came
to the country by air, 10.9% by road, and 1.1% by sea.

Revenue from tourism services went up
89.4% while earnings from accommodation and restaurant services rose 22.1%, the
GSO said, attributing the increases partly to many holidays during the five
months.

However, the number of foreign
visitors in May fell 6.9% from the previous month.

International arrivals in Vietnam surge over 12-fold year on year hinh anh 2Foreign visitors to Hoi An city, a famous destination in the central province of Quang Nam (Photo: VNA)

Recently, Vietnamese tourism has
continually been honoured by foreign media, helping enhance its attractiveness
to international travellers.

Notably, Cat Ba of Ha Phong city has been given the second place among the 10
most spectacular beaches in Asia by Microsoft Travel; Ninh Binh province named among the world’s top 10 best hidden
family vacation spots to visit in 2023 by Canada’s The Travel magazine; and the  North-South, or Thong Nhat (Reunification), railway listed one of the world’s most
amazing train journeys by the Australian version of renowned travel guide book
publisher Lonely Planet.

Meanwhile, Vietnamese fried spring rolls (known as “nem ran” in the north and
“cha gio” in the south in Vietnam) and summer rolls (“goi cuon”) are on the
list of 50 most popular appetizers in the world
compiled by international food magazine Taste Atlas.

In May, Prime Minister Pham Minh
Chinh signed off the Government’s Resolution No 82/NQ-CP on the main tasks and
measures for accelerating effective and sustainable tourism recovery and
development. It specified many groups of measures for developing tourism into a
key economic sector so as to turn Vietnam into one of the 30 countries with the
highest tourism competitiveness./.

Source: https://en.vietnamplus.vn/international-arrivals-in-vietnam-surge-over-12fold-year-on-year/253791.vnp

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CPI increases by 0.01% in May

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The General Statistics Office (GSO) on May 29 announced that the May consumer price index (CPI) increased by 0.01% month-on-month mostly due to increases in prices of food, electricity, and water.

CPI increases by 0.01% in May hinh anh 1A man shop at a supermarket in Hanoi. (Photo:VNA)

Hanoi – The General Statistics Office (GSO) on May 29 announced that the May consumer price index (CPI) increased by 0.01% month-on-month mostly due to increases in prices of food, electricity, and water.

The May CPI increased by 0.4% compared to December 2022 and 2.43% from the same period last year.

The average CPI of the first five months of this year rose by 3.55% over the same period last year.

The year-on-year rise in CPI from the beginning of this year tends to slow down gradually with 4.89% in January, 4.31% in February, 3.35% in March, 2.81% in April 2.43% in May, the GSO pointed out.

Factors that pushed the CPI up in the first five months of this year include the increased prices of education, housing and construction materials, culture/entertainment, and tourism because of increasing demand after the COVID-19 pandemic was put under control.

In addition, prices of food items hiked by 3.8%, mainly due to higher consumer demand during holidays and festivals.

Meanwhile, factors that pulled the CPI down during the period included the falling prices of fuels and postal and telecommunications products.

According to the General Statistics Office, core inflation in May increased by 0.27% over the previous month and by 4.54% over the same period last year. The average core inflation of the first five months of this year rose by 4.83% year-on-year, higher than the CPI growth rate (3.55%)./.

Source: https://en.vietnamplus.vn/cpi-increases-by-001-in-may/253788.vnp

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Measures suggested to guarantee corporate bond market’s stability

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Several measures have been suggested at an online seminar held by the Government Portal on May 28 to help the corporate bond market maintain its stability and operate in line with law to aid economic growth.

Measures suggested to guarantee corporate bond market’s stability hinh anh 1Illustrative image (Photo: vneconomy.vn)

Hanoi – Several measures have been suggested at
an online seminar held by
the Government Portal on May 28 to help the
corporate bond market maintain its stability and operate in line with law to
aid economic growth.

The corporate bond market is a big source of capital for the
economy. In the latter half of 2022, a “psychological” shock was recorded in
the private placement segment following many violations uncovered by
authorities.

The Government, the Prime Minister and management agencies have
made many important decisions to stabilise the market, ensure its compliance
with law, and enhance people’s trust to support the economy.

Speaking via videoconference, Assoc. Prof. Dr Vu Minh Khuong,
a lecturer at the Singapore-based Lee Kuan Yew School of Public Policy, said to help enterprises avoid committing violations, their leaders should gain a thorough understanding of corporate
governance, ensure legal issues and rescue response, and conduct annual audits.

It is a highly urgent need to build a foundation
for a healthy financial system, he said, expressing his belief that the
Government of the current tenure can manage to do that and view current
challenges as a chance to make strategic determination to create a good
foundation for the time ahead.

Prof. Dr Hoang Van Cuong, Vice Rector of the Hanoi-based National
Economics University, held that it’s now the time for increasing resources for
businesses, noting companies are sourcing capital mainly from the corporate bond market
and bank loans, and enterprises’ stable operations will help maintain
macro-economic balance.

He added the bond market requires both capable
stakeholders and a legal environment for an ecosystem. Facing the recent “bond
crisis”, the Government has taken relatively timely and methodological moves to
early prevent the situation from getting worse.

Measures suggested to guarantee corporate bond market’s stability hinh anh 2Some participants in the online seminar (Photo: VNA)

Suggesting ways for shoring up the market, Deputy Minister of
Finance Nguyen Duc Chi said it is necessary to issue legal regulations on the
bond market and make flexible and effective response to changes in reality.

Recently,
the Government issued Decree 65/2022/ND-CP and
Decree 08/2023/ND-CP, helping bond issuers and investors to have legal tools
and time to settle immediate difficulties in terms of money, liquidity, and
collateral, among others basing on the consistent principle of harmonising interests
and sharing risks.

Chi said
bond issuers must be responsible for their obligations and commitments towards
investors. State agencies need to monitor enterprises and the market to ensure
that obligations are fulfilled in accordance with law. Meanwhile, investors
themselves should also adhere to legal rules so that the State can guarantee
the market’s transparency as well as the rights and interests of all
stakeholders.

Facing difficulties in the real estate market, the
Government has taken many measures to assist bond issuers such as
extending debt and tax payment deadlines and reducing lending interest rates. The
moves have helped the corporate bond market regain stability, the official went
on.

At the
seminar, participants also shared views on the stabilisation of macro-balances
and the results obtained so far. They perceived that the combination of
policies on macro-economic governance, especially the harmonious use of fiscal
and monetary policies and an expanded fiscal policy like extending tax payment
deadlines, cutting down taxes, and reducing land rents, is critical to
macro-economic stability./.

Source: https://en.vietnamplus.vn/measures-suggested-to-guarantee-corporate-bond-markets-stability/253780.vnp

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