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"Vietnam Real Estate - looking back 20 years": The financial

Post time: 12/10/2013

When trying to answer the questions of the second article in the Forum titled " Vietnam Real Estate - looking back 20 years," South Real Estate Forum Dia ( DNRE ) to coordinate review and analysis of the problem but with the progress of the preliminary Vietnam 's economy in 20 years .

Since the early 1990s , Vietnam 's economy has gradually become a market economy under the management of the State . Role of the State in regulating the market in general and the real estate market in particular that the market operates in a positive way is very important . However, intervention methods or regulation specific to each stage of the process of " marketization " economy always different and that's what DNRE Forum discussed in this article .

In the process of " marketization " of state intervention is always inversely proportional to the " market level " of the economy . Put it another way , in the process of " marketization " economy , the State will need more control and minimize interference by moving to policies that regulation of financial instruments . According to this view , we see clearly the impact , of the State to regulate the real Estate market Vietnam has changed quite clear :

1 . First Impact :

When the going market trading activities and transfer of " underground " in the early 1990s , the state was forced to participate in legalizing the land transactions launched by the Land Law 1993. Opinions of many experts believe that the introduction of the Land Law said created " fever " 1993-1994 land first , but this may not always be completely accurate .

Intervention or more accurately, the " legalize " the transaction and transfer of land and land use rights is not necessarily the cause of the fever that is the State must do to adapt to the needs market . Of course , the transfer needs are small and not associated with the legalization of the policy , the " flare up " of trading activity is understandable words or image : Land Law 1993 as an open , cleared the water in a canal was available but was not allowed to use .

Next is the need to control the water flow into the channel . In fact , prior to the 1993 Land Law , the land was assigned to the user and is not transferable . After the 1993 Land Law was born , the money comes in to purchase land use rights have strong influence on the economy is still very weak in the renewal period begins . But at this time there are no official statistics to assess the rate of " capital flows into the ground " / total gross domestic product ( GDP ) but we are also not hard to imagine the average GDP / head people of Vietnam in 1990 was only 105 USD - that is, the total gross domestic product is only about $ 8 billion - the amount of financial if not put into production which transferred to real estate transactions , the form of attracting capital from people at that time was the only credit funds will be disabled and affected the economy significantly . That's not to mention the back with the cash flow from the banking system through the investment channel transfer land through a number of companies such as Minh Phung - Epco , Tamexco ...

With the situation as explained above , the State had to stop real estate investment channels to protect the new economy toddler into a trend of " marketization " is unavoidable . However, by way of policy intervention ( Decree 18/1995 ) instead of financial regulation that is focused economy are still used in that period . This also shows that " market level " Vietnam 's economy in the 1990s was very low , almost negligible .

2 . Second Impact :

According to the first article of this Session : land rush second place by investors to predict and evaluate policies for overseas Vietnamese to buy houses and land price issued new prospects for the housing market land so many investors buying land in coastal areas around the estimates of the Institute of Economics Ho Chi Minh City , the amount of investment reached about $ 6 billion . Thus, the level of income / capita average about $ 400 in 2000-2002 , the $ 6 billion figure is about 20 % of the total gross domestic product .

Again , the state of the market impact on administrative policy that is specific to the 2003 Land Law and other legal documents . At this time , the statistics above $ 6 billion is only a child can not really exact number and the question posed at the time 2003 was :

Why Vietnam stock market during the years between 2000 and completely silent , even at risk of sinking into oblivion that cash flow is not transferred to the Stock Exchange on speculation that the transfer of land to a number absolutely small ?

There was a brief answer to that question is not easy to understand that perhaps the reverse is the main phenomenon as " a market " in which we said the 2003 Land Law and legal documents other rules . According to the DNRE , the impact of the 2003 Land Law and other legal documents , 2003 successful real estate transactions fell 28 % in 2004, down 56 % and down 78 % in 2005 ! Also in the Vietnam Stock Market , the picture is exactly the opposite : the market size has strong leap to 22.7 % of GDP in 2006 and further increased to more than 60% of GDP in the period of extreme top .

Thus , the impact of state policy since 2002 has caused a second time freezes Real Estate Market Vietnam from 2002 to 2006 with the flows switched Stock Market under the wishes of the details macroeconomic Vietnam . But regulatory domains Vietnam Stock Market analysis beyond the scope of this article but the link between the growth / decline of the Stock Market related to the freezing / boiling of Estate Market Vietnam production of the 2002-2008 year is cause for articles must mention .

3 . Third Impact

According to some experts in securities , in terms of objective , before the market volatility of the world financial and economic difficulties in the country , the price of the stock has decreased continuously in 2008 and market capitalization fell by more than 50 % , to 18 % . As the domestic economy and the world began to recover slightly from the second quarter of 2009 , the stock price began to rise again with the number of listed companies on the market has increased rapidly . Market capitalization of the stock market in 2009 has reached 37.71 % of GDP .

Again , like the article says a financial flow between Vietnam Stock Market and Real Estate Market Vietnam . The outbreak of the Vietnam Stock Market in early 2007 has made the economic decision makers are forced to curb lending policies Securities and Stock Market Vietnam slowed and then quickly switch to decline strong . Financial flows from securities to real estate channel to overflow , causing the third active until the 2007-2008 economic regulation forced to change policy direction " rescue " Stock Market by administrative measures when the VN Index fell more than 200 points and HNX index slipped below 100 points. The financial regulation has to say on Real Estate Market Vietnam entered a new quiet phase - lasts far.

Here we are more a reality that the State had to cool down the real estate : the reason is the switch to finance real estate in this period not only from people that have a small part of the listed companies , received a large amount of capital from the securities market , but not for the purpose of developing production and business land speculators move forward quickly to make a profit . This phenomenon is beyond the function of securities markets and have a negative impact on the economy of Vietnam, but so far has not fully evaluated .

Thus, this paper attempts to answer two questions of the second article of the Symposium " Vietnam Real Estate - looking back 20 years." Content can be summarized as follows :

Three vibrant real estate market in Vietnam are market principles - when financial flows are taken to channel investment properties strongly that the State must enact policies to curb development out of control and cause " adverse effect " - the phenomenon that is "frozen " .

First time freeze just enough to line financial return to the banking system but was born Securities Markets , the financial markets did not move back securities that caused the "explosion " of real estate in 2001-2002 forced the State to regulate in this policy and lead to closing time Monday to freeze .

Period 2002-2006 shows that the surface is poor for both phases Real Estate Market and the Stock Market Vietnam but Vietnam 's economy has the stable development with the active participation of FDI , FPI , ODA and remittances . If the general assessment , we can consider this period Vietnam achieved great progress in economic development ... until the cumulative financial flows into securities markets create bubbles and the risk of forcing the State to embark to use regulatory policies as noted above .

Last " hibernation " today ( from 2008 to present) of real estate market started with the financial regulator (ie have more " market " than the two intervention previous policy ) . However, the evolution of the real estate market in the two regions have opposite expression : South Market sunk into decline in both transaction price encroachment , while the North Market is the lively local in a number of segments , and some areas actually affected by depression after the government introduced the Ministry Decree 71 and Circular building is a 16 by the end of 2010. Thus, the State was forced by regulatory policy or in other words " Real Estate Market Vietnam is not really regulated by market principles ."

At this point , we may have a few questions :

1 . Period 2002-2006 is explained when and how the Stock Market and Real Estate Market are located in the state of depression ?

2 . Why did from 2008 to date have opposed developments of Real Estate Market in North and South ?

3 . Although economic performance of Vietnam is undeniable but seemingly " always follows the policy market " and a threat to Vietnam 's economy may be in any field when financial flows moved to the strong and then the State must always " intervene " to create a " stable " for the market ?

DNRE Forum wishes you read together with you to discuss in the next post.

DianamRe

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