STATE REGULATION OF THE REAL ESTATE MARKET IS NECESSARY BUT NOT EASY

The government will intervene when real estate prices increase or decrease by more than 20% within three months. Experts believe that this regulation indicates a deeper government presence in the real estate sector, facilitating better market control, but it will not be easy to implement.

Government will intervene when real estate price increase or decrease by more than 20% within 3 months

In the recent fluctuations in the real estate market, the Law on Real Estate Trading 2023 and Decree No. 96/2024/ND-CP guiding certain provisions of Law on Real Estate Trading (hereinafter referred to as "Decree 96"), which has recently been promulgated, has clearly and detailedly regulated the real estate market.

Accordingly, the Law on Real Estate Trading 2023 stipulates that the State shall regulate the real estate market through planning, land use plans, construction planning, programs, urban and housing development plans; ensuring the supply and structure of real estate products are suitable for each market phase; and ensuring the real estate market develops healthily, safely, and sustainably.

Regarding measures to regulate the real estate market, the Law on Real Estate Trading 2023 stipulates 06 implementing measures, including: adjusting planning, land use plans, and housing development programs; adjusting supply through the product structure of projects; extending tax payment deadlines; and providing preferential interest rates or conducting fiscal and credit policies.

Based on the stipulated principles and measures, Article 34 of Decree 96, which came into effect on August 1st, has supplemented a provision for assessing the real estate market situation as a basis for proposing real estate market regulations

Accordingly, the Ministry of Construction, following the Government's directives or based on price indices, real estate transaction volumes, and other economic and social statistical indicators related to the real estate market, shall assess the real estate market situation and propose market regulation measures.

A study, comprehensive report, and proposal for real estate market regulation measures shall be conducted when the real estate transaction price index fluctuates by more than 20% over 3 months or when the real estate market experiences other fluctuations that affect economic and social stability.

As such, compared to the previous law, the Law on Real Estate Trading 2023 and Decree 96 have taken a significant step forward by providing specific provisions regarding the principles, measures, and basis for proposing real estate market regulations.

Lawyer Le Cao, Lead Lawyer of FDVN Law Firm, believes that this regulation will motivate real estate market regulators to pay closer attention to price index fluctuations and compel the real estate information system to provide more accurate data on price increases and decreases.

The State's regulatory role will foster more in-depth assessments of market fluctuations, ultimately leading to the development of long-term solutions for effective management.

Regarding its impact on the real estate market, Lawyer Cao believes that the strict regulations outlined in the Law on Real Estate Trading 2023 and Decree 96 will help to prevent abnormal market fluctuations in a timely manner.

"In the short term, these policies may not yield immediate results due to the unique characteristics of the real estate market. Market fluctuations are not easily influenced or altered, unless they are sudden and temporary shifts. However, in the long term, these real estate market regulations are necessary to foster a sustainable market," said Lawyer Cao.

It is not easy to "steer" the market

The new regulations governing the real estate market are viewed as having a highly positive impact, demonstrating a deeper state involvement in this sector. This development sets the stage for better market control in the future.

However, it is challenging for the government to intervene and regulate the market due to the difficulty in accurately determining price fluctuations. Particularly in a context where real estate prices are surging but not uniformly across all segments and regions, differentiating between speculative bubbles and genuine demand increases is complex

According to a report by the Ministry of Construction, the period from 2020 to 2022 witnessed numerous abnormal price increases, especially in suburban land. In many suburban districts of Hanoi and neighboring provinces such as Bac Giang, Bac Ninh, Hoa Binh, and Hung Yen, land prices surged by 40-50% compared to pre-pandemic levels.

For the condominium segment, in its recently released report on housing and the real estate market for the second quarter of 2024, the Ministry of Construction reported a significant increase in condominium prices in major cities such as Hanoi and Ho Chi Minh City.

For instance, in the Hanoi market, several condominium projects recorded significant price increases. For example, prices at Royal City increased by 33%, The Pride by 33%, My Dinh Song Da - Sudico by 32%, and Vinhomes West Point by 28%. Even older urban areas such as Trung Hoa - Nhan Chinh saw condominium prices rise by 25%, and the Nam Trung Yen resettlement area experienced a 20% increase…

Lawyer Le Cao stated that although the government has implemented various measures to stimulate the real estate market, many of these policies have yet to yield the expected positive results. For instance, the 120 billion VND preferential loan package for social housing development, which was launched over a year ago, has shown limited effectiveness in terms of accessing capital and disbursement rates.

Meanwhile, sustainable and practical solutions like adjusting zoning regulations and land use plans cannot bring about immediate changes to the market.

“While government regulation of the real estate market is necessary, it is not easy. I believe that it will be difficult to steer the market in the desired direction in the short term”, said the managing lawyer of FDVN Law Firm. He also assessed and stated that the government needs to redefine the groups of market regulation measures appropriately to achieve effective results in practice.

Specifically, for the group of sustainable and long-term regulatory measures such as urban planning, land use planning, construction, and urban development, there should be no waiting until the real estate market experiences unusual fluctuations before proposing actions. Instead, it is necessary to review the entire national and local planning system starting now.

Lawyer Cao gave the example of abandoned real estate projects nationwide, arguing that competent authorities must promptly resolve these issues to return idle land resources to the market. This will increase the land supply for new projects, mitigating land scarcity and preventing house price hikes.

Regarding the current state of planning from the central to local levels, we should avoid fragmenting planning maps into separate ones for each locality. Historically, our country has often seen multiple localities competing to become this or that center, leading to years of indecision and uncompleted projects.

"The lack of a comprehensive vision has led to fragmented planning at the local level. Despite dwindling land resources, plans are not sustainable, resulting in frequent adjustments and changes every 5-10 years. A major flaw in planning is that once plans are approved, they are often left unimplemented, leading to numerous stalled real estate projects while many people lack land to use ", emphasized Lawyer Cao.

Regarding immediate and short-term solutions such as tax policies and financial and credit policies, Lawyer Cao believes that specific actions are necessary. Accordingly, when proposing solutions related to finance, credit, or tax incentives, a clear implementation plan must be established to avoid situations where the proposed solutions sound appealing in name but fail in execution.

Additionally, Vietnam could consider adopting the approach taken by the People's Bank of China, which directly supports local governments and enterprises by purchasing distressed real estate assets. These assets could then be refurbished to meet the needs of low-income earners, and substantial subsidies could be provided to enable these individuals to access affordable housing.

According to the expert, with the current solutions for regulating the real estate market, it is not sufficient to wait until there are significant fluctuations before conducting research and proposing measures. We need to be prepared in advance. Emergency solutions should only be used as a last resort, but when implementing these fire-fighting measures for the market, they must be strong, substantial, and practical enough to be effective.

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