Getting a handle on housing growth

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Ministry of Construction (MoC) deputy minister Nguyen Tran Nam said property construction should be considered a production area since it was a labour intensive sector which used materials to create products. Nam, however, suggested classifying property trading services as non-production area only.

Nam said the MoC would file proposals to competent government agencies regarding the issue.

Nam’s proposal stemmed from the fact that property was taken as a non-production area which suffered from restricted access to bank loans in light of banking authorities’ recent decision to retain outstanding loans growth at local banks of less than 20 per cent for 2011 to curb inflation.

In fact, property investment is a capital intensive area while mobilising investment capital for property projects currently presents a huge challenge to investors.

Bank lending rates remain high at around 20 per cent per year. Besides, as a non-production area, property investors could not source bank loans for projects.

Property investors are in a dilemma as under Decree 71/2010/ND-CP guiding the implementation of the Law on Housing property developers are eligible to raising at most 20 per cent of property value from prospective customers in the initial state of property construction.

In this context, demand for housing from local residents is forecast to soar.

According to a report on housing development strategy to 2020 with vision to 2030 of the MoC, Vietnam would need around 2.5 billion square metres of housing by 2020 assuming that the population will be around 100 million and per-capita housing area average 25sq.m by that time.

The current housing area stands at about 1.5 billion square metres. This means that Vietnam will need to build one billion square metres of housing area additionally within the next decade to offset the shortfall.

The report also read that around 700 million square metres of housing area was either built or renovated in the past decade, averaging 70 million square metres per year and current per capita housing area is approximately 16sq.m.